When you are very much in love and buying a house with your partner for the first time, thinking about what might happen if you ever break up might sound unromantic. But, in reality, it is the sort of pragmatism that could protect both your heart and your money. <\/p>\n
When Victoria (who asked for her last name to be omitted to protect her identity because she now works as a domestic violence advocate), now 34, moved in with her boyfriend in Hampshire in 2014, she was planning ahead as to how to manage their joint finances if they broke up. <\/p>\n
\u201cIn my life, I have seen lots of women trapped in relationships because they are not financially independent,\u201d she tells i<\/mark><\/strong> over the phone. \u201cSo, I said upfront that I wanted a cohabitation agreement to make sure we both got back what we put in. <\/p>\n \u201cI wanted to do it while we were happy \u2013 to make sure we made the agreement when we loved and cared for each other so that we were both comfortable with what was in it,\u201d she adds. <\/p>\n Family lawyers and legal bodies such as The Law Society <\/a>recommend that unmarried couples draw up a cohabitation agreement<\/a> \u2013 a document that sets out arrangements for finances, property, and children in the event of a breakup, illness, or death. <\/p>\n Victoria and her boyfriend had bought their home \u2013 a semi-detached two-bedroom house \u2013 for \u00a3180,000. <\/p>\n \u201cI was 26 and broke at the time,\u201d Victoria says. \u201cI didn\u2019t have a lump sum to put in, but the plan was that I would pay half the mortgage and contribute to decorating the place.\u201d There was no other way, reflects Victoria, that she would have been able to escape private renting and get on the property ladder by herself at that time. <\/p>\n The number of cohabiting couples is growing faster than the number of married couples with an increase of 25.8 percent between 2008 and 2018 according to Office for National Statistics (ONS)<\/a> data. This growing trend has also heralded a new kind of break up for younger adults: the \u2018Millennial Divorce\u2019<\/a>. <\/p>\n The \u2018Millennial Divorce\u2019<\/a> occurs when you are not married but split up after buying a home together and that was exactly the situation that Victoria found herself in. <\/p>\n House prices may have recently stopped going up as rapidly as they have been in recent years, but they are still at historic highs. The latest house price data published by HM Land Registry (HMLR) for October 2022<\/a> show that average house prices in the UK increased by 12.6 per cent between October 2021 and 2022. This was up from 9.9 per cent in the year to September 2022. <\/p>\n This continues a trend of record house price inflation since the pandemic began in 2020. Earnings, meanwhile, have not gone up at the same rate. As a result, housing is now less affordable than it has been since the Victorian era in the late 1800s<\/a>. <\/p>\n This has been particularly hard on young first-time buyers without family wealth (aka the Bank of Mum and Dad<\/a>) and caused some couples \u2013 like Victoria and her ex \u2013 to throw their incomes and finances in together in order to become homeowners. <\/p>\n Combining finances with someone you are not married to can cause difficulties. As things stand, cohabiting couples have fewer rights than married couples. <\/p>\n If one person owns the property and it was not agreed at the point of sale that the couple were \u201cjoint tenants\u201d (this means owning the home 50:50) or \u201ctenants in common\u201d (this means that each party owns a share, for example, a 30:70 split), then the person whose name is not on the mortgage has to prove<\/a> that they contributed to the deposit or mortgage repayments or that they made a financial commitment such as paying for major works with an understanding that this would be a contribution towards owning a share in order to get any money back. <\/p>\n In the event of a breakup, the person who is not the owner has no right<\/a> to keep living in the home. And, unless the home has been left to them in their partner\u2019s will, they will not inherit it automatically if they die which is why a cohabitation agreement is, as Victoria notes, always a good idea. <\/p>\n However, legal advice is expensive and not everyone is able to access it. Added to that, not everyone is aware of the need to do this. Indeed, I am this newspaper\u2019s Housing Correspondent, and I did not write a cohabitation agreement with my now-ex-partner when we bought a flat together in 2017. That lack of knowledge has caused much anguish as there was no financial exit plan for either of us when our relationship broke down in 2019. As the question of who got what inevitably arose, discussions were had when emotions and tensions were high which made an already difficult time even harder. <\/p>\n The lack of agreement, in my case, left me paying a mortgage that had once been paid by two people, dealing with repayments on a government Help to Buy loan, and dealing with fraught conversations about who should live in the flat. Because we were not married, I had little to no legal recourse.<\/p>\n I have also spoken to dozens other people<\/a> \u2013 of all genders \u2013 who have found themselves in similar situations after a breakup because they did not have conversations about joint finances early on. <\/p>\n Three years after moving in together, Victoria and her boyfriend also broke up. Unlike me, because of her foresight, she had a blueprint for what needed to happen next in writing making her situation the direct opposite of mine. <\/p>\n \u201cWhen we broke up there was no debate,\u201d she reflects. \u201cThe breakup was amicable and we just sat down, worked out what I had put into the house, closed our joint bank account, and [my ex] transferred me the money I was owed.\u201d <\/p>\n Victoria got back \u00a313,000 which, in the years that followed, she has been able to use as a deposit to buy a place of her own. <\/p>\n \u201cI think people have romanticised views, that if you [draw up an agreement] it means that you think you will break up,\u201d she reflects. \u201cBut it\u2019s not transactional or clinical, it\u2019s important to have financial security. Particularly now.\u201d <\/p>\n Expert mortgage broker Ray Boulger<\/a> agrees. He has decades\u2019 worth of experience and is currently the senior mortgage technical manager at John Charcol<\/a>. <\/p>\n \u201cIf you compare the situation with 20 or 25 years ago when house prices were significantly lower, then there is definitely more pressure [on people when they break up] now,\u201d he told i<\/mark><\/strong>. <\/p>\n Added to high house prices, there is also the fact that interest rates are rising and are currently higher than they\u2019ve been in over a decade. According to Moneyfacts data on 21 November showed the average two-year fixed mortgage rate was 6.21 per cent<\/a> \u2013 which was up from 2.34 per cent in December 2021<\/a>. For five-year mortgages, the rate was 6.01 per cent, up from 2.34 per cent in December 2021. <\/p>\n Rising rates coupled with the house price inflation of recent years, mean that it can be more expensive, and therefore challenging, for a single person to take over a mortgage that once had two people\u2019s names on it. <\/p>\n That said, it\u2019s not all bad news. <\/p>\n Boulger notes that one of the other things which have changed in recent years is \u201cthe guidance from the Financial Conduct Authority (FCA) which states that lenders should offer tailored forbearance advice in situations where clients are struggling\u201d.<\/p>\n \u201cThat could include a situation where a household income has gone down from two people to one,\u201d because of a breakup, he adds. <\/p>\n \u201cA potential solution could be that if one person wants to take over, you can change the mortgage term to interest-only for a period to make it easier to afford to stay in the property,\u201d Boulger continues. \u201cWhether the couple had children or not is going to be a consideration there because moving might mean lots of upset such as changing schools.\u201d <\/p>\n In most cases, Boulger says, the lender should be able to talk to the borrower about their options. <\/p>\n Ultimately, Boulger also urges couples to draw up a cohabitation agreement when taking out a mortgage together. \u201cIf you leave it until you break up it can become very difficult to sort things out,\u201d he concludes. \u201cBut if you\u2019ve got something in writing beforehand then at least you both know where you stand.\u201d <\/p>\n<\/div>\nMore on Housing<\/span><\/h4>\n<\/figure>\n
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