Splitting Your Assets: What you need to know

How do you split your property assets when you split up or someone dies?

If you have bought a property with a partner, friend or family member, and then you split up or they pass away, what should you do?

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Sadly, we can’t solve your relationship problems, but we can offer some advice on your property assets and how you can purchase them and divide them if the time comes.

Our tips come with an important caveat: This is in no way legal advice, and you are always advised to take legal advice both when buying a property together and when legally dividing assets.

You can’t really buy a house without a solicitor because of all sorts of legal checks and contracts that need to be compiled and signed. A solicitor will also advise you to take out life insurance and if you have a Will, to look at that. Both legal steps are up to you but are always advisable.

We’re going to offer up some tips for first time buyers and buying a buy-to-let property.

First Time Buyers

It’s pretty much universally accepted that it’s particularly difficult to get onto the property ladder right now.

Covid-19 and the currently rapidly rising cost of living has pushed up the average age of first-time buyers in Britain by two years.

Before the pandemic, the average age of a first-time buyer was 32.

Post-pandemic, the latest analysis suggests that despite the house-buying boom during Covid, the average age of a first-time buyer is now 34.

To get onto the hallowed property ladder, many people pool their money and buy for the first time as a couple, with a sibling or another relative and, increasingly – especially in the capital where prices are always higher – with a friend or a group of friends.

How to get onto the property ladder

The biggest blocker for getting on the property ladder is getting that deposit together, so you need to budget hard and figure out how you can save as much as you can:

Should you sell up o rent out

  • Quit renting. If it’s available and safe for you to do so, consider moving back to your family home or lodging with a friend or family member who will charge you a lot less. Then, save up all the money you would be spending on rent
  • Find a better deal. Not everyone has somewhere to go to reduce their costs, so take some time to do your research and get the best rental deal possible. Could you downsize? Move to a different area (without spending the rental savings on commuting instead)? Could you look into a flatshare rather than living alone?
  • Budget hard. While we don’t agree that giving up avocado toast and takeaway coffee will magically make it possible to get a house, we do think that budgeting is key! Hunt out the best deals you can for things like wifi, set yourself a monthly budget for eating out and stick to it (life is for living, after all!). Do what you can to maximise what you save each month

However, it takes time – often years – to save up what you need to, to get on the ladder, So you might want to consider other options:

  • Buying part of a property, known as shared ownership
  • Buying with a partner/sibling/friend

How to protect your assets if you buy part of a property

If you buy with someone else, the most straightforward way to do it is for everyone to put the same amount into the deposit. 

You will need at least a 5% deposit to buy a property. And the average deposit for first-time buyers in the UK right now is nearly £75,000 according to Rightmove.

This figure has doubled in the last decade and while Rightmove points out the deposit

won’t be as high for everyone, the calculations are based on a single buyer on the median wage being able to borrow a maximum of 4.5 times their salary to purchase a home costing £223,117 (the current average asking price in the UK).

Next step is to decide whether to buy as joint tenants or tenants in common.

According to research, 24% of British people wrongly believe that if they co-own a property with their partner and are not married, ownership would automatically pass to them if their partner died.

People who live together, or cohabit, are not treated the same as a spouse would be by law.

Legal deeds

If you don’t have both of your names (or the names of everyone involved in buying the property,) on the legal deeds, those not on the documents will be left vulnerable if a split occurs.

For example, if two people plan to buy and live at a property, and pay the mortgage together, but only one person has their name on the deeds, there could be problems if you decide to part ways, as the named person can legally claim that the house is solely their own, despite the thousands the unnamed partner may have ploughed into the property.

Jointly owned property

When you purchase a property jointly with a partner or friend, you may contribute different amounts to the initial deposit, or you may have plans to contribute unequally to the mortgage payments, perhaps due to a disparity in your incomes.

This is usually recorded in the transfer document you sign at completion, but can sometimes be outlined in a separate declaration of trust. 

Owning as joint tenants means you have equal rights to the whole property with the other owner and, if you die, the property will automatically pass to the surviving owner. 

This means your whole share in the house becomes theirs. This may not be what you want – especially if you are unmarried and want to protect your money should you break up.

Tenants in common

If you have different amounts to put in when you buy a property, recording yourselves legally as tenants in common means you can own different shares of the property.

Should you sell or rent

If one of you dies your share will pass under the terms of your will rather than going automatically to the other owner (again – you should draft a Will and update it if you buy a property!) 

If you split up and need to sell, you should be able to claim back your deposit share under this method. Especially if both/all names are on the deeds.

If you get divorced or separate from your partner, being joint tenants enables you to ringfence your share in the property so it won’t pass automatically to your ex-partner.

Buy-to-let property

It has become more and more common for lenders to allow multiple applicants on a buy-to-let mortgage.

Lenders recognise that for many this is the only way they are able to buy, by sharing the cost with other people. Some lenders allow up to four applicants per mortgage.

So, if you intend to purchase a buy-to-let as an investment with your partner, spouse, sibling etc., or even as a group as a business, the theory is that a mortgage offer would be more achievable if there are more names and incomes to back it up. 

But the same rules apply about both or all your names being on the title deeds, and whether you buy as joint or tenants in common.

Letting to family

Sometimes, parents decide to purchase a property as an investment for themselves, but for a family member to live in. If a child is going away to university for example, or they are helping an elderly relative to downsize, this could be a good shout.

However, mortgages and taxation become far more complex if you decide to do this because if you want to rent a property to a family member you won’t be able to get a standard buy-to-let mortgage. 

The main reason for this is that most people who go down this route won’t charge their child or parent full market rates to live in the property. 

So mortgage companies consider this more ‘dangerous’ for the borrower and, in turn, for themselves when putting up the cash. They may require a bigger deposit. 

Other moves by lenders also seem to be sneaking in – such as requiring a bigger deposit if the property doesn’t already have an EPC rating, probably because of the government plans to make all rentals EPC C or above by 2025.

So, if you need to stretch your deposit in order to buy a property for a family member, be extra vigilant with how it can affect your mortgage.

The other thing you can do, if you are getting married and want to ensure you’ll get to keep what’s yours in the case of a split, is set up a prenuptial agreement, or a prenup. Not the most romantic proposition, but certainly a practical one!

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