Before you apply for a home loan with your partner, there are a few discussions that you need to have that go a little beyond what you may know already.
So, you’ve found someone you want to spend your life with? The hard part is over, right? ..lol... wrong.
And I am not just talking about deciding on what to eat for dinner 😅
You know each other well enough to know whether or not you each blow the budget every month, but you probably don’t know each other’s complete credit history. So, before you buy a property together, there are plenty of discussions you need to have with your partner. Here are three of them.
Have they defaulted on any payments?
They might be relatively debt free now, but has this always been the case?
One bad mark on a credit file, such as a late car payment or a default on a credit card, will change the approach you need to take when applying for finance.
It doesn’t mean you can’t secure finance, but it may mean you need to apply to a specialist lender for a "low doc" loan.
It is a temporarily solution but we are warning you now, these types of loans generally come with a premium interest rate. And no, not the good type of premium.
Where has that savings balance come from?
If your partner has savings towards a deposit, that’s fantastic, but the balance is only one part of the equation that lenders consider.
If he or she has managed to build up those savings over a good period of time, making regular contributions, and managing their savings well, lenders will consider this a positive indication of an ability to make repayments regularly.
If, however, the savings are the result of a redundancy payout, a gift from family, or backing a good horse, they are still helpful as a deposit, but don’t indicate that ability to make repayments.
Again, this is not the end of the world. You’ll be in a better position than you would without that balance, but may need advice from a mortgage broker to help put your application in the best light.
If we did get into trouble, how would you want to handle it?
You must plan for every eventuality, even one you think is not likely.
Having said that, this discussion isn’t so much about having a solid plan in place for the worst, as seeing how your partner would deal with any difficulty.
If one of you lost your job, or you had unexpected bills that seemed overwhelming, would they try to struggle through, not wanting to talk about it with you or with your mortgage broker, and potentially default on the loan?
Or would they tackle it head on by visiting your mortgage broker or lender with you to make a plan to get through it without defaulting?
At Rockstar Finance, we have helped more than one hundred first home buyers finance their dream home! No matter the season, it always works in your favour to be prepared and organise your finance well in advance!
Before you start looking for a home to share with the love of your life, contact Rockstar Finance today for a free discussion so that we can help you iron out the details and secure the home loan that suits both of you!