Moving in with a partner is an exciting next step in anyone’s life; however, you must consider the practical implications of cohabiting. This includes finances, relationship goals, your attitudes towards spending and saving, and what would happen in the unlikely event the relationship breaks down.
Moving in with a partner
Over the last financial year, housing prices have continued to rise. According to the ONS, in England alone the average house price increase stood at £302,000 (13.1%), For those searching for a new home, this change runs parallel to the current crisis with the increase in living costs. One way that people are finding assistance with these issues is by moving in with a partner so that costs of living can be shared, easing the financial burden.
It is often said that you do not know your partner until you move in with them and this can be very true. To try to avoid any potential hidden surprises, you must ask yourself the following 5 questions and discuss what the responses mean in practical terms with your partner.
#1 – Are you on the same relationship page?
For one of you, the idea of moving in together may be a step closer to marriage and/or children. For the other, it may be that marriage and/or children do not feature in their future. Make sure you do not base your relationship on assumptions and personal hopes. It is essential for you both to understand each other’s aspirations for the future of your relationship.
#2 – What are your financial positions?
You may think that you know your partner’s financial position and your partner may think they know yours. You may not have discussed your salaries, savings, or any debt that you might have and made assumptions based on factors such as job titles, the cars you drive, the possessions you own, which shops you frequent, or the holidays you go on.
If you have not discussed the details of your finances, you may be in for some surprises later on. It is a difficult but essential conversation to have before you move in together and may affect the financial contributions you are each able to make to the relationship both now and in the future. This conversation is a must-have before you live together and make a significant financial commitment together.
#3 – What are your philosophies on spending and saving?
It is only natural that some of us are heavy spenders and some of us are savvy savers. When discussing your financial positions as suggested in #2 above, it is essential for you each to understand whether you hold the same financial philosophies or whether you hold very different views on spending and saving before you move in together. Who is going to pay what? How much can you spend on personal interests vs how much must you spend on shared financial commitments, now and in the future?
#4 – Will you be renting or buying a property?
Renting
If neither of you own a property and you are instead planning on living in rented accommodation, will both of you be named as tenants in the tenancy agreement? (The answer should ideally be yes). Will both of you be paying an equal amount towards the deposit and ongoing rent, or will you pay a portion that reflects your different income? You must not make assumptions and should take steps to ensure that you know where you both stand when it comes to renting a property together and what will happen should your relationship break down.
Buying
One of you may have a deposit and be in a position to buy a property for you both, or one of you may already own a property, and your partner is moving in with you. Or maybe you have decided to buy a property together. In all circumstances, you need to decide what your financial contributions will be to the deposit, mortgage and ongoing financial liabilities such as council tax and utility bills.
Whether you own a property jointly or separately this could have a severe impact on your finances. You should also consider what should happen if one of you were to die or if you were to separate. It is essential that you discuss what your plans are when buying a property or moving in with a partner who already owns a property and seek legal advice to understand your legal position.
#5 – What will your financial contributions be going forward?
Whether you plan on renting or buying a property together, how will you split the cost of utilities and household expenses going forward? It may be that depending on each of your financial positions you wish to split contributions equally or unequally. It is essential to discuss what contributions you will each make.
Moving in with a partner – next steps
Moving in together is an exciting step in any relationship, however, sitting down together and having frank discussions about your financial positions, hopes, aspirations and any agreements you reach in terms of managing your finances are essential. The questions above are not intended to be a conclusive list; after all, every relationship is different. If you are going to reach any agreement concerning property and finances, this should be recorded in writing just in case the worst should happen to either of you.
It is therefore essential that when moving in together, you should enter into a Cohabitation Agreement, which sets out how you will manage your property and finances together and what should happen if your relationship breaks down or one of you dies. A Cohabitation Agreement can save a significant amount of stress and cost that a dispute over these issues could involve and allows you both to move into your new home knowing exactly where you stand. If a dispute arose after a separation, this could cost you over £25,000 plus VAT in legal fees to resolve. However, the cost of putting in place a Cohabitation Agreement is only a fraction of this cost. It provides you with certainty and peace of mind, and you cannot put a price on that.
If you are in a situation where you would consider a cohabitation agreement would be beneficial, please contact the Inheritance and Trust Disputes team on 0345 450 5558 or email enquiries@stephens-scown.co.uk