Buying your first home: 5 mistakes that put your marriage at risk

So you’ve just gotten into a big lifetime commitment of getting married, and want to celebrate that by getting into…a big lifetime commitment of buying a home. Being Singaporean, most of us have a strict need to secure a house the moment we’re married. That tends to result in some rash decisions, with consequences of the “screaming and sleeping on the couch” variety or, worse, putting your entire marriage at risk. Here’s where you should tread carefully:

1. Not working out who will pay for what

To save yourself major arguments later on, it helps to have a frank discussion on who pays for what. This doesn’t always have to be a 50-50 split, and it’s actually quite rare and impractical to do that.

Both sides should work out how much their monthly income can handle. For example, say you earn $12,000 a month and your spouse earns $3,200 a month.

Your combined household income means you can’t get flat, so a condo it is. But if the condo’s monthly repayments come to $3,700 a month, is it really a good idea to split 50-50? At $1,850 a month, your spouse is going to have $450 left every month.

You may be sure you won’t fight about this now, but this sort of imbalance could continue for the next 25 years of your shared mortgage. Feelings of extreme dependency – or personal financial vulnerability – can eat away at people.

You should also work out how much of the down payment each side will cover, how the cost maintenance and taxes will be split, and how much equity each side will have.

In the off-chance of legal separation later (may it neve happen), documenting this arrangement will be a big help.

2. You think of the house as an investment; your spouse thinks of it as a home

Is your house part of your long-term investment plans? If you intend to sell the house in five to 10 years to upgrade, make sure your spouse is on the same page.

Some of the nastiest fights happen when one party wants to sell, and the other refuses. This is especially true if the house has significant emotional value to one side (e.g. you were raised in the same house by your parents, whereas your spouse has always seen it as a stepping stone toward a condo).

If both of you agree that the house is an investment, then have a shared exit strategy. Decide when you’ll sell the house (at a certain date? When the value hits a given amount?) and what the subsequent plan will be.

3. Allowing too much involvement of the in-laws

It’s your house; avoid allowing in-laws to give too much input. This is especially true when it comes to financial contributions: as far as possible, try to keep payments between you and your spouse.

Even if it means living in a five-room instead of an Executive Condo, it’s best that you don’t rely on that unofficial $100,000 loan from your in-laws.

This can come back to plague you later: at best, you’ll constantly be reminded of how much you owe your spouse’s parents. At worst, a financial disaster might make you unable to repay the loan, and sour your entire relationship.

Another problem with giving your in-laws too much input is that you may not end up with the house you want. For example, you might end up living in Jurong when you prefer the east, because the in-laws want to be close to any grandchildren.

Remember the impact of time: it’s a concession you may be ready to make now, but it can become intolerable over a period of five, 10, or 25 years.

Draw a line at how inclusive you’re being, with regard to both your parents and your in-laws.

4. Pushing your shared finances to the very limit

You’ll be surprised at how much you can afford, if both you and your spouse choose to keep working. In cases where both parties are professionals, they’re often surprised by the quality of homes they can afford.

For example, if a couple earns $7,000 each, they can plausibly get a mortgage that costs around $8,000 a month. This is enough for a very nice Grange Road condo, or something on Cuscaden Walk.

This realisation often causes young, married professionals to go overboard.

But don’t throw financial prudence out the window. Remember that your total loan repayments – from all your debts – shouldn’t exceed 40 per cent of your total monthly income.

Also, pushing your finances to the limit can cause resentment if one of you suddenly loses your job, or faces a drop in income.

In the above example, imagine if one spouse becomes unable to pay the mortgage: there’s no way one side can keep paying over $8,000 a month, when their monthly salary is $7,000.

And tempers will start to fray, if one spouse gets blamed for losing the house.

5. Forgetting to consider your spouse’s credit history

If your spouse has a bad credit history, or a record of bankruptcy, you’re going to have serious problems in the joint application. Most banks default to the worst credit rating of the joint applicants.

You could find that, despite your glowing credit score, you can only get 60 per cent financing for your house; all because your spouse had a $1,000 debt written off when he was a university student.

You should have a frank discussion about this before you buy – preferably with a qualified wealth manager. For example, if your spouse needs to wait five years for a previous bankruptcy to disappear, you might want to get a smaller home just under your name.

In the meantime, you can build up bigger savings to upgrade as soon as your spouse can get a loan again.

For less extreme situations, you may need to discuss putting your spouse on an aggressive debt repayment scheme. Doing this 12 months before a home application will improve their credit score (and help ensure they don’t exceed the debt ratio).

Have a frank discussion with your spouse about their debt situation, as early as possible.

What else do married couples need to look out for when buying their first-home? Voice your thoughts in the comments section or on our Facebook community page.

If you liked this article, 99.co recommends 9 milestones to hit before you buy your first condo [July 2018 update] and Thinking of buying a home together before marriage?

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