Three Things You Need to Ask Before You Apply for a Home Loan Together

Before you apply for a home loan with someone else—whether it's your partner or a friend—there are a few important discussions to have that go beyond the surface.

You’ve found someone you want to buy a home with—whether it's building a life together or investing with a trusted friend, the hard part is over, right? Not quite. You might know each other’s spending habits, but do you really know each other’s full financial history? Before taking on a property together, it’s crucial to have some key conversations. 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 documentation loan. Your broker can help you find the right lender and craft an application to avoid the heartbreak of continual rejection.

That savings balance, where has it 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 expert help to put your application in the best light.

If we do 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 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 finance broker, and potentially default on the loan? Or would they tackle it head on by visiting your finance broker or lender with you to make a plan to get through it without defaulting?

Contact us to know your options