Financial Benefits of Coupling Up on a Home Purchase

By Kerri-Lynn McAllister
Special to Walletpop.ca

Not too long ago, it was considered taboo to purchase a house or condo with anyone other than your matrimonial spouse. Today, couples no longer consider marriage a prerequisite to owning a home together.

There are a number of benefits to buying a home as a couple – whether or not you're married. According to reports, the number of couples who have either bought together or would consider doing so before they're married is as high as 55%*. With property prices currently at record high levels, especially in Ontario and British Columbia, it's no wonder that some feel that the only way into home ownership is through splitting the bill.

Still, home ownership is a commitment. A mortgage can be carried for up to 30 years, so make sure that you're ready for the step. For the young and in love, living together can seem new and exciting, but the fact of the matter is that not all relationships last forever. What was meant to be a solution to climbing the property ladder could quickly turn into a pile of debt and regret.

Questions to ask before splitting a mortgage:

1. Are you financially compatible?
Understand and accept each others approach to money, and be open and honest: are you a saver or a spender?

2. Can you both survive on just one income?
Losing or leaving a job is not uncommon over a person's lifetime, so you must be willing and able to pick up the slack in case of an emergency.

3. Did you do a test run?
Benchmark to current mortgage rates and attempt monthly mortgage payments to see how you both fare.

Advantage of sharing a mortgage

Of course there are obvious advantages to splitting the cost burden of buying a home, which include but are not limited to:
Buying power – Two incomes are better than one when it comes to affordability.
Double down – With access to a larger savings pool, it is easier to come up with the money for a down payment and closing costs.
Furnishings – The stuff that filled two bachelor pads can easily be combined for a complete love nest.

RRSP Home Buyers' Plan – If both you and your partner qualify as first-time home buyers, you can each withdraw up to $25,000, for a total of $50,000, tax-free.

Disadvantage of sharing a mortgage

In addition to the long-term commitment required there are some important financial considerations to evaluate as well before taking the leap.
Credit Rating Vulnerability–Co-signing pools both credit ratings in the same boat. The mortgage payment must always be made on time. So, if your partner fails to come up with the funds, it is still your responsibility to cover the monthly payment; otherwise, expect your credit rating to take a hit.

Break-ups – Not all relationships last, as evidenced by current divorce rates. If the other person bails, it leaves one with a full mortgage to pay. If you agree to sell the property and give up the mortgage, the penalties can be substantial.

Also note that when claiming the First-Time Home Buyer's Tax Credit as a couple, the combined amount claimed cannot exceed $750.

As Carrie Bradshaw famously declared on Sex and the City: 'they shoot single people, don't they?' Maybe not, but singles definitely take a hit when it comes to housing affordability.
The BBC reported last year that a single person spends more than £250K (just over $400K CDN) over the course of their life simply because they are not part of a couple. However, joint ownership and commitment are a packaged deal. The fact that you literally cannot live without someone should not be a compelling argument to shack up. There are risks involved.
Learn from the past, live in the present, and plan for the future.

Sources
*http://www.lovemoney.com/news/money-saving-tips-bargains-and-freebies/family-finance/10981/getting-a-mortgage-is-better-than-getting-married-