Buying a condo unit together is one of the biggest decisions you will ever make as a couple. According to a study conducted by Coldwell Banker Real Estate, one in four millennial couples purchased their home before they got married, even prioritizing it over their wedding. But married or not, owning a condo together can present unique financial challenges.
To make sure you and your partner don’t encounter any problems purchasing your unit, here are some of the things that you should do beforehand.
1. Determine what you want as a couple
Even though you’ve been together for a long time, that doesn’t mean that you share the same needs and wants for your future home.
Talk to each other about the kind of unit you want to purchase. Is a cozy studio unit enough for you, or would you prefer having one or two bedrooms in case you’re thinking of starting a family? Are there amenities that you want to enjoy? Where is your preferred location? Do you want a unit that’s ready for occupancy, or can you wait for preselling ones? Most importantly, what’s your budget?
And once you know what each other wants, you can start researching for condominiums that fit the bill. Make sure that you do a site tripping so that you can check the unit and its location firsthand. If possible, speak to potential neighbors, as they can help you make a sound decision on which unit to purchase. Check the developer’s construction history to ensure its credibility.
2. Compare your credit scores
Aside from your current income, there’s one more thing that you and your partner should disclose to one another: your credit scores.
Both of your credit scores will affect your ability to obtain a mortgage and get low-interest rates. Banks view married couples as a single unit, while unmarried couples are assessed as individual applicants even though they’re applying for the same home loan.
If one of you has a poor credit score, the person with the stronger credit score might want to take on the loan so that he can get better rates.
However, having just one person borrow a loan can also decrease the amount that you can loan. It also leaves the other partner vulnerable in case of breakups, as only the person who’s responsible for the home loan will have his name on the property title.
To obtain your credit score, you may request a credit report from Credit Information Corporation, the central repository of credit information in the country. You may also use external databases like Bankers Association of the Philippines Credit Bureau, TransUnion Information Solutions Philippines, CIBI Information, CRIF Philippines, and Compuscan Philippines.
3. Talk about your finances
It might be uncomfortable, but money talks are inevitable. You need to have an honest conversation about the amount of debt that each one is comfortable living with.
You also have to consider other costs aside from your mortgage. How much can each person contribute to the taxes and condominium maintenance dues? Unexpected expenses might also crop up, which could make you come up short for your monthly payments. Working out your budget before getting a home loan is extremely important.
And if you’re an unmarried couple, you also have to talk about the possibility of the relationship turning sour. In such cases, who will manage the debt?
4. Get everything in writing
As in any agreement, proper documentation is essential. This is especially true for unmarried couples, as breaking co-ownership of a condo can get them in a messy legal ordeal.
You should have a lawyer prepare a written document that clearly outlines the full details you and your partner’s arrangement, including each person’s percentage of home equity entitlement. What happens to the property in case of a breakup? Who pays the fees and bills? What happens if he’s unable to do so?
Ironing out such details in advance prevents altercations in case things head down south.
5. Open a joint account
Having a joint bank account can help you work out a budget for paying all your housing dues, such as mortgage, insurance, taxes, and maintenance. You can set up automated monthly deposits from your individual bank accounts so that you won’t forget to fund your joint account.
Start off by saving for the downpayment. Before committing to buy a unit, you should have at least 20% downpayment in your joint account for security purposes. The higher your downpayment is, the easier it will be to pay off the rest of your loan terms.
As for ongoing monthly dues and utilities, set aside about 1% of your home’s purchase price for it. Monthly condo fees can be pretty pricey, and you never know what kind of repairs you might need in the future.
6. Decide on the property title
The title of your condo unit determines legal ownership, so you need to decide whether you’re going to be the sole owner, joint tenants, or tenants in common.
Most married couples go for joint tenancy because it splits the cost 50-50. Meanwhile, the percentage of the split should be stated for tenants in common. It is also better for both parties to hold the title so as not to strip the other person of equity in his investment.
Owning a condo together is a huge step in every relationship, so practicing due diligence is essential. Strengthen your bond and commitment to each other by getting everything in order before purchasing your preferred Avida condo unit.
HOMEPOSSIBLE is where Pursuit of Passion all started. Originally a series of events by Avida, it encourages and educates the target market to take steps toward an independent life and gives them the tools for an easy home purchase. Through the HOMEPOSSIBLE series, Avida has helped Filipinos to be better informed on how they can maximize life opportunities; inspiring and empowering them to reach their life goals, which includes owning and investing in a home.