Mortgage advice for unmarried couples

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By Jonathan Thomas
Know Your Money Editor

Unmarried couples may dream of getting onto the property ladder and buying a house together but there are a number of things to consider before doing so.

We take a look at the state of the current market for those looking to get their first property together and reveal a cautionary tale.

The outlook for first-time buyers

A recent report from FindaProperty.com found that in the past year property asking prices have increased by 1.8 per cent.

Home prices for first-time buyers rose for the fifth month in a row in June following a 0.2 per cent increase.

This means the average entry level home is on the market at £156,065, the highest figure since February 2009 and 1.7 per cent higher than a year ago (£153,460).

The number of properties for sale in the UK has reached its highest level since January 2008, following a ten per cent increase.

Is it easier to get a mortgage?

So, with an idea of the asking prices of first-time properties buyers may be looking to secure themselves a mortgage, but how likely is it they will receive finance?

Recent research from the Council of Mortgage Lenders indicated potentially bad signs as it reported that first-time buyers made up the lowest proportion of house purchase loans since September 2007.

First-time buyers accounted for 35 per cent of all house purchase mortgages in April 2010, a fall from 39 per cent in March and 38 per cent in April last year.

However, despite this, Ray Boulger, senior technical manager at John Charcol, suggested that it is getting slightly easier for first-time buyers to access the housing market.

He said: "It is still very difficult but the reason I say it is getting slightly easier is that we have seen an improvement in the availability of higher loan-to-value mortgages and also the pricing of them.

"There wasn't a huge difference between March and April, but if you compare the availability of higher loan-to-value (LTV) mortgages - 80 to 90 per cent [LTV] - with where we were six months ago, it is significantly better and the pricing is better."

But Paul Holmes, chief executive officer of Firstrung, suggested it is still tough to get on the property ladder.

He said: "You have 1.25 million properties available for sale. Forty per cent of potential buyers can't access the credit to buy those properties and still when you look at Rightmove's average price it is in fact 25 per cent above the average selling price."

Is it best to buy as joint-tenants?

Couples looking to buy a property together might naturally think the best way of splitting it fairly between themselves is to opt for a joint tenancy.

This may be the case, but unmarried couples may wish to consider the worst and think about what will happen if they separate.

Most cohabiting couples who buy together do so as "joint tenants" where they own the house, meaning that in the case of death the share owned by one partner would pass automatically to the other.

However, appeal judges have recently ruled that a man who left his partner 17 years ago was entitled to a half share in the house even though he had never paid the mortgage.

Years of separation and the fact that her former boyfriend had not contributed to the mortgage even when they were together, Patricia Jones of Thundersley, Essex was told her ex was entitled to 50 per cent of the three-bed home.

Mary Webber of Advicenow - which runs the Ministry of Justice's Living Together campaign - told the Observer if a split does happen "you really need to tidy up all the loose ends straight away because they have a habit of tripping you up".

"Even whilst you are together things change dramatically, for example, the relationship ends, or one of you starts putting more money in. You can very easily change a 'joint tenancy' into 'tenants in common' at any point."

The solution?

It is wise to be aware that whether you own a property as joint tenants or as tenants in common, it can be changed at any time.

If a relationship ends, former couples should look to resolved the issue as soon as possible, perhaps even using mediation.

Court can prove difficult, not to mention expensive.

To compare the latest mortgage rates from leading UK lenders click here.

Important Notice
This guide is intended for general information only and is not intended as, and does not constitute, any form of advice, recommendation or endorsement by us of any particular product(s) or services and you should rely on your own further research and professional advice in relation to your specific requirements and circumstances before purchasing any products or services. Use of this guide is subject to the Terms of Use of the KnowYourMoney site.