Should you buy a home on your own, as a couple, or move in with your partner?
If you've reached a period in your life where you'd like to set down roots, you have several possible avenues depending on your marital status. You can buy property on your own, with a partner whose financial situation may be very different than yours, or move into your partner's home. Here's a short how-to guide and some testimonials to help you weigh your options!
Buying property comes with its share of questions and decisions. You have to consider the down payment, mortgage, and, in some cases, your romantic situation. For instance, what will you do if you buy alone and then meet someone? If you move into your partner's home? If you buy property together, but have vastly different incomes? If just one of you has debt to pay off? These scenarios are very common. Read on for testimonials from people who have been through these situations and to learn about the various options to consider.
Buying a home on your own
It can be gratifying to buy property as a single person, but it comes with several challenges, including saving up for a sufficient down payment. To make buying a first home easier, the Home Buyers' Plan (HBP) allows you to withdraw up to $35,000 from your RRSP. This means that thanks to the HBP, couples have access to up to $70,000 to put toward their down payment—not an insignificant sum! If you're buying on your own, you'll have to save the rest of your down payment using savings plans other than the RRSP and the TFSA. You'll also have to be patient, because you won't get the extra boost from tax refunds on your contributions. On the other hand, buying alone can be more affordable since you're less likely to be looking for a large property.
Planning for homeownership expenses
In addition to a mortgage, several other fees come with the purchase of a home, including the following:
- Inspection fees
- Notary fees
- Property transfer tax (also known as the welcome tax)
- Municipal and school taxes
- Condo fees, if applicable
Marie-Claude took the plunge on her own. To determine whether she was making a sound investment, she added up all the fees and current expenses she would have to pay, excluding paid-up capital, and divided the total by 36—the minimum number of months she planned to keep her condo. The result was a monthly amount that she would not recover through the sale of her property. She then compared that amount with the cost of rental housing in her desired neighbourhood. "I wanted to see if renting a property was cheaper than covering all the fees and current expenses that I wouldn't recover during resale," she says. "If so, it wouldn't have been advantageous to buy. That was partly what helped me make my decision. I also wanted a place I could call my own." What's more, property values were on the rise, so she had a good chance of making a profit during resale. However, Marie-Claude did wonder about her status as a single person. "Would it be more complicated to move in with someone in the near or distant future, knowing that my condo would always be mine, that it would always be my place? I haven't really found the answer, but I knew that I would be happy in my home. I told myself that I should live for myself and avoid making plans based on hypothetical situations."
Choosing a central location might be a good idea
One thing was clear to Marie-Claude: she wanted to buy in a central neighbourhood, close to the people she loves. "I would've felt isolated living alone in an out-of-the-way neighbourhood and ended up spending more elsewhere, like on taxis. When I go out, I don't want to cut the night short to catch the last metro because taking a taxi is too expensive and walking home is out of the question!"
To avoid paying your mortgage all on your own, you could also consider getting a roommate or renting out a room through a home-sharing site.
Buying a home together despite disparate financial situations
There's no guarantee that you will fall in love with someone who has a similar financial standing. If you and your partner have vastly different earnings, savings, and debts, it's probably in your best interest to have an open discussion about finances. It's important that you agree on the terms of your purchase and set a budget. Here are a couple of ways you could divvy up the mortgage and housing expenses:
- You could agree to set aside an amount every month for shared housing and living expenses, and then each do as you please with your remaining income.
- You could each come up with a personal budget and put all the rest in a joint account for household expenses.
Either way, once you've decided that you want to buy a house together, you might want to review how you manage your budget as a couple.
Finding a solution that works for you
Lots of couples find their own way to manage money. "We wanted to make the best investment possible, even if we couldn't share the costs 50–50," says Mathieu. "When we bought our duplex, we both put down as much as we could, so 25 percent and 75 percent. Our share of the mortgage is proportional to how much we each earn. For renovations, we each invest whatever we can and keep track of the expenses so that the profits can be divided up fairly when we decide to sell."
When you clearly express your needs to your partner, you can come up with creative solutions that could spare you from many arguments down the road. For instance, if you're dying to turn your basement into a workout space, but your partner is indifferent, you could choose to cover those expenses yourself. Your partner could take on other expenses later on, like building their dream home cinema.
Being wary of debt
Even if most couples have different financial situations, you still need to watch out for debt. A partner who is saddled with an enormous amount of debt or a low credit score might not be the person you want to buy a house with. Especially since you may be left to cover more than you bargained for if your partner can't pay their share of the mortgage. If your partner faces bankruptcy, you can usually negotiate an agreement with a Licensed Insolvency Trustee (LIT) [in French] to help you hold on to your home, depending on your situation.
Finding a happy medium
Some couples look for a home with mortgage payments and associated monthly fees they can both afford equally. That's what Christian and his partner decided to do. "We wanted to split the cost of our house 50-50, but since our salaries were so different, we didn't know if it was going to be possible. Finally, we decided to each draw up a budget and figure out what we could both afford to spend on a mortgage. This helped us choose an amount that worked for both of us."
It is generally advised that your housing costs, including taxes and heating expenses, not be more than 32 percent of your gross income, according to the Canada Mortgage and Housing Corporation. It may be worthwhile to meet with a financial planner to help you plan your budget, and to ask a notary for legal advice and to put everything in writing.
Fortunately, in addition to the HBP, there are other tools available to help you purchase your first home, under certain conditions.
Moving in with your partner
If you fall in love and decide to move in with your significant other, there are certain rules that you should follow if you hope to live happily ever after. It will be important to be fully transparent and find an arrangement that works for both of you.
Paying your share
You can choose to make monthly payments or pay rent to your partner. "Before buying a house with my boyfriend, we lived together in his first house," said Anne. "I didn’t want him to support me, so I gave him an amount every month. It wasn't much, and it allowed me to save up for a future investment." Experts agree, however, that the owner should be the only one paying for repairs to the property since they will be the one who benefits from the added value if they decide to sell the property.
Buying out your partner
Some prefer to buy out their spouse's share of the house by signing a deed of sale, conveyance, or gift, rather than both buying a new home. That way, the buyer can avoid paying the inspection fees and real property transfer tax (or welcome tax) if they're in a common-law relationship or married. Keep in mind that the HBP cannot be used to buy out the share of a residence owned by a new common-law partner.
Regardless of your relationship status, it's important to be aware of your financial situation and open about your ability to make payments to ensure you can afford to buy a house. If you're buying as a couple or moving in with your partner, communication is key to finding an arrangement that works for both of you. No matter what the case, it's always worth asking a notary for legal advice and getting everything in writing.