A homeowner has cautioned unmarried couples not to become ‘sucked into the dream’ of purchasing a home together before first executing a ‘mortgage prenup.’
Tom Lord, a 33-year-old PR Account Director from Leeds, acknowledges that he was ‘naive’ to ‘jump into’ purchasing a home with his first committed partner shortly after her graduation from university in 2017.
However, he was not prepared for what was about to happen. The couple separated right before the pandemic struck the UK, but they continued to live together in the home during lockdown.
How the couple met
After graduating from Newcastle University, where he met his partner, Tom was living at home with his parents in Leeds and working part-time at Argos in 2014.
Despite being two years older than his partner at university, Tom had been making the trip back and forth to spend weekends and holidays with her.
The couple made the bold decision to purchase a home in his hometown shortly after she graduated. They both believed that their love would blossom, so they did not set any financial safeguards money in case something went wrong.
The couple spent three months looking at houses before settling on a two-bedroom house in Leeds’ Garforth neighbourhood. They were splitting a £531 monthly mortgage for the £142,000 property.
Their decision made financial sense since they believed that contributing towards home ownership was a better option than renting and paying a landlord a significant amount of money every month.
When the issues started
Tom acknowledges that even after six years of dating, the pair had never ‘tested’ what it would be like to live together. “It was probably too soon, looking back,” he adds.
“I thought we could just jump straight into buying a house as soon as my girlfriend finished university,” Tom remarked.
Initially, everything proceeded without any issues. There were no problems when Tom and his partner moved into their new house. Life was good for a couple of years.
But when Tom started working for a public relations company, things began to shift. He spent more time out with clients or at company events because his new profession was quite social.
“I went out three or four times a week,” Tom added. “Our relationship became strained as a result, and we began to argue occasionally. She did not drink so she did not understand how you can expect to go for ‘one or two’ and end up staying out all night.
“These small arguments escalated to the point where I was doing one thing, and she just wanted to live a very different life.
“It wasn’t that we didn’t care about each other, we just realised we didn’t want the same thing, so we decided to break up.”
How the financial circumstances changed
Tom re-negotiated his salary and adjusted his monthly mortgage payments to afford the house on his own.
But when the pandemic hit, everything changed. His company cut salaries to 80%, putting him below the threshold required to cover the mortgage alone.
Concerned about selling at that time and despite the tension, Tom and his partner decided to stay in the house during lockdown.
“We both had own space and there was a respectful understanding,” Tom stated.
Tom’s financial circumstances improved once lockdown ended, enabling him to buy out his ex from the house.
After consulting with financial consultants, they decided on a reasonable settlement. Tom remained in the house where they had lived together.
Warnings they should have seen
“Looking back, I wish I’d been more cautious,” Tom continued. The ‘what-ifs’ are not always on your mind when you are young. When purchasing a home, you get caught up in the process and fail to consider the possibility of things going wrong.
When considering the financial aspects of the split, Tom regrets not having the forethought to sign a ‘mortgage prenup’ or a Declaration of Trust, which would have simplified the process.
A legally binding declaration of trust outlines the contributions made by each individual to the property’s expenses as well as the distribution of the property’s worth upon sale.
“I’m more conscious of how important it is to think these things through now, even though it was a steep learning curve,” Tom added. “If I could offer any advice to young couples, it would be ‘don’t get sucked into the dream’, think before you sign any contracts, and consider the possibility of it ending.”
Even though Tom and his ex-girlfriend’s relationship did not end happily, they both left it with a newfound understanding of the costs involved in purchasing a home together.
“I have a lot more equity in the house now than if we had sold it at the time,” Tom continued. “I would have been in a far worse situation now and would have had to go and rent. Therefore, it has worked out for me to stay in the house. She has moved on and is enjoying her life, and I see her sporadically.”
Frequently asked questions
What happens to the co-owning house if you break up with your partner?
UK couples often face tough decisions about shared property and mortgage commitments after separation, with 89% of Brits not discussing these matters with their partner. This is particularly concerning for first-time buyers, who often struggle to secure their first set of keys.
Jo Pocklington, Managing Director of Purplebricks Mortgages, shares her top five tips to help home-owning couples facing a break-up.
- Assess your legal standing
Many clients are opting for joint property purchases with a Cohabitation Agreement, which outlines financial contributions, maintenance, and property ownership. This agreement ensures certainty and reduces disputes, ensuring a smooth partnership and potential sale.
- Review your options by speaking to a trusted Broker
A trusted mortgage broker can help you navigate your financial options during a challenging time, assessing your ability to buy out your ex-partner, remortgage in your name, or sell the property.
They can also advise on timing and timing aspects. It is important to have a clear understanding of your goals and seek professional advice, especially when things are emotionally charged.
- Sell the property
Selling a shared home can be a straightforward solution for ex-couples, as it allows them to find a new place without unpleasant monetary discussions.
Timing is crucial, and couples should get an updated valuation and calculate their equity split after settling the mortgage and selling costs.
Consider putting money towards renovations for both parties. Go into the sale with realistic expectations, as house prices may have increased or decreased.
Consider selling first and renting temporarily while finding your ideal home.
- If the mortgage is joint, continue making the payments and come to a legal agreement
Maintaining mortgage payments is crucial for both parties’ credit scores and future borrowing capacity, even if immediate sale or buyout is not feasible.
Both parties remain legally responsible for the mortgage until the property is formally transferred or sold. It is important to assess long-term options and consider one person taking over mortgage payments after separation, especially if one partner has a higher income.
Regularly checking your mortgage account is essential, regardless of who pays the mortgage.
- One partner buys the other partner out
If both parties are financially able, one person could buy out their ex’s share of the property, appealing to those with emotional ties or children. A mortgage broker can advise on this option, finding the best mortgage deal based on a current market valuation.
To ensure a smooth process, arrange a property valuation to determine your equity owed.
Remortgaging to buy someone out can offer complications, such as insufficient equity or ex-partner’s affordability issues.
Consider additional costs like stamp duty, legal fees, and early repayment charges when calculating the total cost of a buyout.
Expert opinion on the topic
Managing Director of Purplebricks Mortgages, Jo Pocklington adds:
“In my 23 years of experience, I have seen that the biggest property mistakes often happen when emotions are running high after a break-up.
“Your first course of action should always be to take a step back and talk to a reputable mortgage broker; even when everything seems hopeless, they can offer choices you may not even be aware existed.
“Even though it may be hard to continue making mortgage payments on a home you no longer own, failing to do so would unavoidably harm both of your credit ratings for years to come and restrict your future opportunities.
“I always tell clients: protect your financial future first, deal with the emotions second.”
Further Information
Wills and Probate – Oakwood Solicitors
WHAT TO DO NEXT
To make a start on the next step in your property journey, get in touch today to book a consultation with a member of our team. Call us on 0113 218 5727 to find out how we can help you.
