Can't buy me love, but love can buy a first home

You don't need a wedding certificate to get a mortgage, says Sam Dunn. But you might need a legal agreement before you sign up
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The Independent Online

Poets through the ages have celebrated the power of love. And, these days, love even has the power to put young couples on the property ladder.

House prices in the UK have risen at such a rate that many first-time buyers now rely on romance to give them the keys to the door.

Mike Turner and his girlfriend Becky Owen bought a house together in March. Their three-bedroom home near Leicester cost £100,000, a sum they could never have afforded without pooling their resources.

"We wouldn't have been able to buy any other way," says 29-year-old Mike. "We managed to save a small 5 per cent deposit and got a home loan by combining our salaries."

Nearly two-thirds of all first-time buyers are couples, according to research from Alliance & Leicester. Yet only a fifth of couples say that cementing their relationship was the main reason for their decision to buy. In most cases, gaining a foothold on the property ladder was more important.

That might sound unromantic but soaring prices, combined with higher interest rates in recent months, have put a home of their own out of reach for millions of people.

The Council for Mortgage Lenders reckons that, this year and in 2005, no more than 29 per cent of those taking out a mortgage will be first-time buyers - compared with 47 per cent back in 1999.

Buying as a couple helps to overcome the financial obstacles: two of you can share the deposit and the mortgage repayments. You will be able to borrow more, too: most banks and building societies will lend 2.5 times joint income, compared with three to four times income if you buy on your own.

Of course, in an ideal world, the cohabiting couple's feelings for each other will flourish as the value of their home increases. Sadly, the reality can be harsher, since owning a property may put pressure on a relationship. And if the worst happens and the couple decide to split, a first home can turn from a love nest into a vipers' nest.

"Imagine if one of you is offered a great job overseas or, worse, the relationship breaks up," says Peter Gettins of mortgage broker London & Country. "Ideally, you will work things out amicably - but life often isn't like that."

The nightmare scenario of two ex-partners living in the same flat, tied to one another by their financial responsibilities, is not taken into account often enough, he adds.

If partners fall out and one refuses to pay their share of the mortgage, the lender is entitled to chase both parties for payment of the arrears. One way to reduce the risk of this happening is to draw up a contract beforehand, in the same way that two siblings or friends buying a property might do.

Although setting down a list of demands in case your relationship breaks down might seem hard-hearted, it could save you both much anguish if things go wrong later.

In the eyes of the law, there's a big difference between married people buying a home and other couples doing the same, says Mark Warwick, a property barrister at Selborne Chambers. "If it did get to a litigation stage, it could get very messy without a contract," he warns.

A contract, or trust deed, is akin to a pre-nuptial agreement, explains Chris Berry of the law firm Hogan & Hartson: "Of course, at the outset, all couples look to a rosy future, but somebody has to ask 'what if?' "

Most contracts outline the course of action that should be taken to cover the mortgage if the couple's relationship breaks down. This will typically include a plan for the property to be sold or an option for one party to buy the other out; details of how the money invested in the property is to be divided; how the mortgage payments will be met until the sale; and how any unexpected costs will be paid.

For example, one higher-earning partner may have put down, say, 70 per cent of the deposit and contributed the same share of the monthly repayments. The deed will reflect such financial arrangements.

"If it all goes to plan, then you'll never need see the document again," says Mr Berry. "But if it all goes pear-shaped, it will really help you."

He also suggests that younger couples, who may not have been together for very long before buying, should consider arranging a "tenancy in common" rather than the usual joint tenancy. This can help speed any future sale process, if necessary.

The contract should cost no more than £600 but each of you should first seek individual legal advice before instructing one solicitor to draw it up, and then signing in the presence of a different lawyer.

"It's a big commitment to buy with a partner," says Drew Wotherspoon of independent financial adviser The MarketPlace at Bradford & Bingley.

"No one enters into this kind of agreement thinking that it will fail, but it is sensible to be prepared for all eventualities."

Above all, advises Mr Gettins, don't rush into buying just for the sake of getting on the ladder: "Try to look at it as a home for five years - not just an investment for 12 to 18 months.

"But if you do see it as an investment, draw up a contract."

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