Five questions every couple must ask before investing in property

By Giles Maynard

Investing in property as a couple is always a good idea, but that’s not to say there aren’t any risks involved. Just like tying the knot, it’s a huge commitment that requires careful planning. 

The property-buying process should also only be considered if both parties in the relationship can afford it, and it fits into your joint long-term financial plans. 

Whether you’re buying to let or to live, here are five questions I urge every couple to ask before they start house hunting. 

1. What do we really need?

 You want to ensure that your decision to buy a property together doesn’t impact your future financial stability. I would advise any couple considering taking on this huge financial responsibility to start by seriously considering what you both want and need right now, as well as their future. 

Firstly, are you buying a home for you both to live in or an investment where you’ll receive a monthly rental? The former requires a lot more forward planning and research as you’ll need to think about factors such as location, work commuting times and how long you plan to live there. It’s also important to choose a property that suits your lifestyle as your family grows. 

2. How much can we afford? 

Buying a property together is largely dependent on your joint financial situation. Discussing money is crucial. No matter how uncomfortable it might be, do it early, and do it honestly. Think about how much money you can commit to putting down for a deposit and disclose any existing debts. This includes personal loans, higher purchase agreements, and missed direct debits that negatively affect your credit rating.  

Remember, buying a property is often a life-long commitment, with mortgages lasting more than 25 years, so go be thorough when it comes to those short and long term scenarios: 

• How will you divide household expenses? 
• Who will be responsible for the mortgage payments? 
• Will you still be able to save money for rainy days and holidays? 
• What will happen if one of you cannot work or decide to have children? 
• Will you be able to meet your monthly mortgage instalment if it increases? 

3. Have we done enough research? 

I cannot stress this enough: research is absolutely critical when it comes to buying property. It’s important to get your head around associated costs such as insurance, legal fees, transfer costs and capital gains taxes. Another factor to consider is which of the different property ownership options best suits you as a couple. 

In South Africa, you can purchase property either through a trust, a private company, a closed corporation, or a natural individual (the most common). Suppose you’re investing in a buy-to-let flat or townhouse in a residential estate. In that case, this is likely to be sectional title, which has its own sets of advantages and disadvantages compared to freehold properties. 

Then, of course, there are offshore property investment opportunities you might want to consider. My advice here is to speak to a dedicated wealth management expert who specialises in this option — someone who can evaluate your investment portfolio objectively and holistically.

4. What are the implications of having a mortgage? 

When applying for a mortgage, couples have the advantage of boosting the amount they can borrow because there is more than one income. However, this comes with its own set of risks. 

Remember, a mortgage is essentially an agreement between you and a lender that gives them the right to take your property if you fail to repay the money you’ve borrowed. If both of your names are on the mortgage, you will be jointly liable for the mortgage payments. The lender will therefore be able to chase both of you for full payment if you fail to meet the monthly payments, which will directly impact your credit ratings.

Every mortgage also comes with its own set of caveats explaining what happens in certain situations, such as paying off your loan early. Read these carefully with your financial adviser to avoid nasty surprises later on down the line. 

5. What happens if things go wrong?

Thinking about unpleasant situations is never easy, but it has to be done. A wealth expert can assist you in exploring the different options should either of you lose your job, become ill or suffer an untimely death. They will also go through the different options of disposing of the property should you decide to discontinue your relationship. 

It might not be what you want to talk about now, but it will save you a lot of hassle later if you both tackle those difficult conversations now. 

Enjoy the 13th edition of Top 500