Couples & Friends overlook pitfalls of buying property together

The property boom has made it increasingly difficult for first timers to get into the market so many dating couples and friends are choosing to buy together but often overlook some of the pitfalls. Gavin Southwell, National Sales Director Gauteng for MortgageSA, says, "Because of the rapid escalation in property prices, we are seeing more and more couples and friends pooling their resources to get a bigger bond and get onto the property ladder. Going in jointly allows for investment in a better location which ultimately results in a better return.

"Most banks recognize joint income, it's just as easy to buy as a couple as it is to buy on your own - the banks require the same documentation, including separate bond applications for applicant, proof of income and bank statements."

"As a rule, 30% of joint gross income will be used to work out how big a bond can be taken. "But it's more than just a financial decision; there are other things couples and friends need to consider, especially in instances where the relationship breaks down"

With friends who go into partnership it is often best to buy a property that allows for a certain amount of privacy and equality, including separate bathrooms, garage and parking bay facilities. "Differences in facilities like an en-suite bathroom or one parking garage can aggravate a harmonious living arrangement as the financial commitment to the bond is the same, but one gets the better living quarters or better parking facilities," says Southwell.

A couple that splits up now owns a property together and each may want their money out. The only way around this is for either one to buy the other out or to sell the property and split the profits accordingly - so it should be agreed upon before the purchase is made.
People should also draw up a contract with an attorney covering parameters for selling, financial hardships and second bonds. "One party might want to take out a second bond to renovate but the other doesn't and problems can arise".

It is useful to set out house rules (in the case of friends) regarding responsibilities of maintaining the property, house guests, pets and other hot topics - without becoming too pedantic.

Try and get separate bond accounts under the same property, this will allow each party to pay their halves off at their own rate and speed whilst having the benefit of an access bond. Mortgage Protection is a must. "There is no obligation from one partners family if that person becomes disabled, retrenched or even dies. It is paramount that if the couple do not have a legal relationship (i.e. marriage), that they ensure that they are responsible to the debt should unforeseen circumstances arise. Both parties must agree to this and it's important for both parties to check annually that the cover has not lapsed".
As a homeowner it is compulsory to have Houseowners's Comprehensive Insurance (HOC) as it ensures the property mortgaged as security for the bank loan. HOC is short-term insurance that protects your home against fire, flooding and any other disaster that damages the structure and fixtures of your home.

Without point scoring, keep a record of what each party spends on the house - especially permanent fixtures and additions. "Review your budgets and update contributions and insurance regularly".

Article by : Dave Welmans - (www.thepropertygame.co.za)