Have the difficult conversations
Whether you want to buy a home together, or an investment or commercial property, it’s important to have the hard conversations in order to understand the implications of co-ownership and protect your individual interests. Mfundo Mabaso, Growth Head of FNB Home Finance, lists the common financial mistakes that couples make when purchasing their first property:
1. Buying beyond their means - it is important to leave surplus disposable income after the new repayment is considered so that couples can weather any financial storm they may encounter in future.
2. Not catering for additional costs before buying - the couple should establish what the costs will be for the property they are buying and then save upfront for the shortfall.
3. Not having insurance - this is needed to cover the bond in the event of either of you dying and leaving the partner in a difficult position.
4. Not having a will - most banks offer this service free of charge.
Communication is key
There are also a number of communication errors that couples make during the property buying process, which can compromise you both financially and emotionally. According to Paula Quinsee, a Johannesburg-based relationship expert, these mistakes include:
5. Not having prior discussions about money which can cause conflict and put strain on a relationship.
6. Having different ideas on the aesthetics, functionality and practicality of a property, in relation to their budget and personal preferences, which can cause frustration and potential conflict when it comes to property hunting.
7. Struggling to agree on which area to purchase property and how this relates to each person’s commute to work, schools in the area (if they have children) and how this may impact their lifestyle and quality of life.
8. If unmarried and cohabiting, failing to draw up a formal partnership agreement to determine how the asset will be split should something happen to either party or in the event of the relationship dissolving.
9. Struggling to agree on whether the property will be in both party’s names, who will be paying the bond versus other property contributions (i.e. rates and taxes etc.) and how the asset will be split.
“Working with a therapist, financial planner or third party, who can guide the couple through these discussions, can add a lot of value to the process and the relationship,” Paula advised. “If unmarried, I also strongly suggest consulting a legal expert who can advise on having a partnership contract drawn up that is in the best interest of both parties and each one’s financial contribution.”
It is critical that unmarried couples investing in a home together put measures in place to protect themselves, if the relationship were to dissolve. This is because common-law marriages are still not seen as valid in South Africa and the 2008 Domestic Partnership Bill has yet to be enacted. The most efficient way to secure the interests of both partners is by appointing lawyers to negotiate a domestic partnership agreement upfront. This agreement can then stipulate the following:
• How the bond will be repaid
• The percentage of contributions and ownership
• How maintenance costs, rates and taxes and home improvements will be split
• Rules of conduct for the property.