Investing your love in bricks and mortar
1 BUDGET
Before you start the fun stuff – househunting – make sure you have covered the boring stuff: finances. Work out how much you can afford to put towards mortgage repayments each month, based on your joint net income, and joint outgoings.
If, like Kate and William, you are thoroughly modern and are already living together in rented accommodation, this is easier to work out (whether you are comfortably affording your rent repayments is a good guide to what you could afford in mortgage repayments). If you are living separately, you may find that your outgoings on household bills shrink when you move in together – a bonus of coupledom – so take this into account.
Excel spreadsheets really come into their own when budgeting: familiarise yourself with the formula function.
2 BE FRANK WITH EACH OTHER ABOUT EARNINGS
There can be no financial holes barred when applying for a joint mortgage. Every little missed credit card payment will come out in the open, as will earnings. When assessing how much you can afford monthly, mortgage lenders will take into account the amount you earn jointly.
Each lender has different criteria – for example, some will lend a maximum of three times the highest income and one times the second income, or four times joint income. Some will just go on what you can afford rather than income multiples, but check before applying. If either of you has credit problems in the past, be aware that this may result in a rejected application, although lenders will look more kindly on you if the highest earner has an unblemished credit history.
3 POOL RESOURCES
When sourcing a mortgage deal, buying as a couple is easier than buying as a singleton because you can pool resources for a deposit – another bonus of coupledom. It is best to try and contribute equally but in practice, this is unlikely, since the chances are your incomes aren’t the same. If one of you has contributed more to financing the purchase, consider what this would mean if you broke up and sold the property. Would the main contributor get a bigger share of any equity gain?
It is not a nice conversation, but it is worth having and even putting in writing or in an email, should the unthinkable happen.
4 THE BIGGER THE DEPOSIT, THE CHEAPER YOUR REPAYMENTS WILL BE
There are first time buyer deals available to people with as little as 5 per cent of the purchase price to put down, but rates are cheaper if you can find 10 per cent, cheaper still at 15 per cent, and really great if you have 25 or even 40 per cent to put in. Consider how much you can raise as a deposit before househunting, as this will inform your range of options more than anything else. The Post Office currently has some competitive deals for those with smaller deposits.
5 SET UP A JOINT ACCOUNT
This does not have to be a big, meaningful relationship event. It is just practical. All of your household outgoings, including the mortgage, electricity bills, council tax, TV licence and Sky can come out of it by direct debit. Each person’s contribution to the household expenses can also go into it by standing order. This is more egalitarian than nominating one person to take charge of all of the household bills and is a good exercise in shared responsibility that will serve your relationship well in the future.