It’s a big, exciting step in any relationship. Moving in together can save you both money and bring you closer together, but cohabitation is a major commitment and not one to take on lightly. Before you embrace domestic bliss, here are some questions you need to ask first.
What are your finances like?
It may be unpleasant to have “the awkward money talk,” but it’s an essential first step towards cohabitation. Have a frank conversation with your partner about your financial health. Being open about salaries, debt and financial goals will bring you closer together and make things a lot easier down the road.
How will we split expenses?
How much do you plan on contributing towards rent or mortgage payments? What about home insurance, bills, groceries and other household expenses?
For some couples, a 50/50 split works well. However, if there’s an income disparity between the pair, things can get muddy. A $1,000 contribution towards rent will mean something very different for someone earning $40,000 a year versus someone earning $120,000. For these couples, they may want to consider having each partner contribute a certain percentage of their income rather than a set amount.
Some couples decide to split costs in other ways—for example, one partner covers the bills while the other pays for groceries. What’s “fair” varies from couple to couple, but the most important part of managing your money while living together is communication.
What if one of us already owns?
Things can get complicated when one partner owns their home and the other does not. If there’s a mortgage to pay down, the couple will have to decide what a fair division of housing costs looks like—do you split the mortgage down the middle, even though the “renter” part of the pair won’t be buying into any equity in the home?
There are other homeownership costs to think about, too, like property taxes, condo fees, hydro and heating/cooling bills and home insurance. What should each party contribute to each of those?
A simple way to break it down is to treat housing expenses as though the homeowner partner is your landlord. The homeowner bears all of the associated risks, including a decline in market value, expenses that would be associated with a future sale and any necessary upkeep or maintenance, so it makes sense to approach shacking up with this framework in mind. However, if things go sour, don’t forget the “renting” partner will be the one to move out–the person who’s not on the title of the home has no intrinsic right to it.
Another solution is to become a “tenant-in-common,” which would give the renting partner a percentage stake in the property. This can get messy, so proceed with caution.
Additionally, once a couple passes the common-law threshold–which varies from province to province but is typically three years–the rules can change entirely. At that point, a common-law partner could claim a portion of their partner’s property value as a result of any major renovations on your home completed without an agreement.
A final option is having the partner who owns rent his or her property to an entirely separate tenant so the couple can rent or purchase a new property together. If the couple breaks up, there’s little legal confusion over who owns the rental property. A Pilon Group Agent can help you find the perfect home to fit your needs and budget as a couple.
Who will send off the rent and utility payments every month?
This may not seem like a big deal, but keeping up with bill payments is a logistical nuisance that can quickly build resentment between a couple. Make sure both of you agree on who pays what and when so there isn’t any nagging about payments down the line. If you decide your significant other will be the one in charge of paying the bills on time, make sure you still have a basic understanding of your financial health as a couple and where your money is going.
Do we want a joint bank account?
Many couples choose to open a joint bank account together for housing expenses, which makes paying rent or a mortgage or contributing to bills and groceries a breeze. With the ability to monitor all your collective household expenses, you have a much better understanding of your combined cash-flow and living costs. There are some drawbacks to a having a joint bank account, however. The last thing you want is for one partner to begin dipping in for extra cash, so proceed with caution.
Should we split furniture or buy our own?
Keeping major purchases separate and documented will help save you a lot of grief in case of a breakup. Of course, when furnishing your place together, you may find you need to invest in some essentials. Decide in advance who pays for the new vacuum and who gets to keep it if things don’t work out.
In love and real estate, never make assumptions. Go over every financial detail together and plan ahead. Together, you can come up with a mutually beneficial and fair agreement hopefully ensuring cohabitating bliss for years to come.
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