Addressing the 'what ifs?' of buying property together for the first time

Buying property together for the first time is a big step in any relationship. It's also likely to be the biggest financial commitment that a couple will ever undertake.

So as 'doom and gloom' as it sounds, it's important to factor in the 'what ifs?', if things don't go according to plan.

When a relationship breaks down, one option is to sell the house and divide the sale proceeds. Another is to transfer the house into one person's name. But what happens if one half contributed more money towards the deposit than the other? What if one partner previously owned a property, sold it and used the sale proceeds to put down the deposit on the new one? What if one person received money from a family member to help with the deposit?

The starting point is that equity is shared according to the name or names on the title, which is usually held in equal shares. In circumstances where relationships break down though, arguments can easily arise about whether or not equity in the property should be shared equally between the separating couple, especially if different amounts have been contributed.

Fortunately, there is a proactive way to avoid these types of disputes. The solution involves a legally-binding agreement, prepared by a lawyer. That agreement, usually signed around the time of purchasing the property, details how much each person contributes to the deposit and what will happen with that money in the event the couple ever separate.

For example, partner A contributes £25,000 to the deposit and partner B contributes £5,000. Title to the house and the mortgage is in joint names. The agreement could state that, in the event of separation and the house being sold, once the mortgage is repaid, A will receive the first £25,000 of the sale proceeds, B receives the next £5,000 and the remaining free proceeds of sale are divided equally between them.

Such agreements provide a level of security and certainty to the couple, allowing them to take control of a particular situation while everything is going well in the relationship.