In recent years, more couples have chosen to purchase a property and move in together before marriage, creating their own shared space early on. However, buying a home involves significant financial commitments and long-term responsibilities. Aside from down payments and mortgage repayments, a key topic of discussion–sometimes even contention–is whose name should be on the property title.
In the past, many potential buyers were concerned that co-owning a property as a couple could affect one party’s first-time homebuyer status. This could mean higher stamp duties for future property purchases, significantly increasing the cost of home ownership. However, with the government having recently removed several property cooling measures, individuals no longer need to pay additional stamp duty for owning a second property.
It’s worth noting that banks tend to impose stricter scrutiny on unmarried couples applying for joint mortgages. They carefully evaluate both incomes, repayment capacities, and the nature of the relationship. Therefore, couples should decide in advance whether to purchase the property under joint names with shared borrowing responsibilities or have one party listed as the borrower while the other acts as a guarantor for the mortgage application.
If one partner’s income is insufficient to meet mortgage requirements, the easiest solution is to apply as joint borrowers. This allows the bank to combine both incomes, increasing borrowing capacity. Since both parties are considered borrowers, they can each open a “Mortgage-Link” savings account, earning interest to offset part of the mortgage interest expenses.
Another common approach is for one party to act as the guarantor. Typically, the individual with a higher or more stable income takes on the role of property owner and borrower, while the other party serves as the guarantor. However, this option comes with certain limitations and risks. For example, if applying for a high-loan-to-value mortgage, mortgage insurance providers generally only accept “close relatives” as guarantors. As a result, unmarried couples may not qualify for mortgage insurance to finance more than 70% of the property’s value.
By standard definition, ordinary couples are not considered “close relatives.” However, engaged couples who can provide proof of their wedding plans are treated as close relatives and may qualify for higher loan-to-value ratios with mortgage insurance. Therefore, before purchasing a property, couples should carefully evaluate their combined incomes, repayment capacities, and future plans to decide on the most suitable approach.
Ownership allocation is another critical factor that couples must not overlook when buying a property. Disputes over property ownership are common when relationships end. Clearly defining and protecting each party’s interest in the property from the outset can help prevent conflicts if the relationship breaks down.
In general, if both parties contribute to the down payment and mortgage, or if one party covers the down payment while both share the mortgage repayments, the party making financial contributions may claim beneficial ownership, even if the property is registered under only one name. This requires supporting evidence, such as bank transfer records, payment receipts, or written agreements.
To avoid potential disputes in the future, couples are advised to draft a Declaration of Trust, often referred to as a “cohabitation property agreement,” if the property is registered under only one party’s name while the other has contributed financially. This agreement should specify the ownership proportion of each party, arrangements for down payments and mortgage payments, the distribution of profits when the property is sold, and how the property would be handled if the relationship ends. This type of arrangement helps protect both parties’ interests and ensures clarity, reducing the risk of conflict or unfair outcomes.
