Money isn’t the most romantic topic to talk about as a couple. In fact, it’s a subject we avoid as much as possible for various reasons, from feeling uneasy about it, to wanting to keep that part private to simply being unfamiliar on how to do it. Money conversations are inevitable and important, however, for those who want to take their relationship to the next level, ring the wedding bells, and buy their first home together.
It’s no secret that a home is a major purchase. This is the one life decision you don’t want to mess up and regret, which is why it’s crucial to iron out finances before going property hunting. That said, ask yourselves these money questions as you prepare for your big purchase:
Why Are We Buying in the First Place?
Much like a marriage, buying a property is a long-term commitment. You’ll be tied to a 15- or 30-year debt once you take the plunge. To have the endurance to bear such responsibility down the road, you must have the right motivation from the very beginning. Ask yourself the whys.
Are you buying because it’s the “adult thing” to do? Because all your engaged and married peers have gone this direction? Or because your finances dictate that you’re ready? That after calculating costs, you determined that it’s more financially wise to rent rather than buy? Explore your motivations for buying. Be honest with each other. If your heart and mind is in the right place, you can have the reassurance that you can commit to this long-term project as a couple.
What Will Our Home Be Like?
What you want in your home will make a huge influence on your budgeting later. Before you even start looking at home inspirations online, make sure to have this talk with your partner first. List down your non-negotiables and negotiables.
Under the essentials, you should agree on the location and size of the property. The type of living arrangement should also be discussed, whether you’re going for a house and lot or a condo for your first home. Meanwhile, under the wants, discuss the amenities and style. Here, you can browse online for inspiration. Check out different types of communities. In high-end condominium complexes such as Marco Polo Residences in Cebu City, you’ll find recreational facilities that you might want your next home to have.
While you can create your essentials and wants list together, it’s a better idea to make it separately. This way, it’s easy to confirm similarities and spot the differences, which will be the focus of further discussions. Be ready to explain the items you wrote on your list, but at the same time, prepare to compromise on some aspects as you listen to your partner.
How Much Home Can We Afford?
The home buying budget is next on your money talk. In a nutshell, there are three simple steps to creating the budget. First, add up the money going in. This includes your income and your partner’s, as well as other sources of cash (e.g. side hustles, stock dividends, rental investment returns). The second step is to list your household expenses. This includes food, utilities, transportation, health check-ups, debt payments, and savings.
The final step is to know the cost of homeownership. In this regard, you should be able to apply the 25 percent rule in home buying. Your monthly payments on mortgage, property taxes, homeowner’s insurance, and homeowners’ association fees should not exceed 25 percent of your monthly take-home pay.
Using a home loan calculator, you can figure out a ballpark estimate of selling prices of properties that suit your budget. As you start your property hunting, it should be easy to filter through properties.
It goes without saying that transparency is important in this money talk. Be open about all financial aspects, especially with how much money you bring in each month and how much debt you’re paying individually.
How Will We Save Money?
After determining your home buying budget, it’s time to talk about the game plan for saving for the downpayment. Remember that the usual requirement is 20 to 30 percent of the total contract price. Once you determine that amount, know how much you’ll be able to put away monthly for your dream home fund. From there, plot a timeline. How much time will it take for you to reach the amount? A year? Two and a half years? Regardless of how long, be realistic in your expectations.
If you want to speed up the saving, there are two ways to go about it: cut some expenses and take up a side hustle. Ask yourselves: what are some things we can give up on? Take-out coffee every morning? Date nights every weekend? What additional jobs can you pursue? Look up job postings on freelance websites and social media groups to know your options.
How Will We Pay the Other Costs?
Even after moving into the home of your dreams, you’re going to cover a lot of house-related expenses: utilities, maintenance, association fees, and emergency repairs. As early as now, while you’re property hunting, discuss with your partner how you’re going to tackle these financial obligations. Do you split the costs fifty-fifty? Do you need to assign obligations on each other? Or do you pool all your income together to pay dues off? There’s no one single rule that is most effective. Know what works best for you.
Another expense you should be ready to discuss is the moving costs. All the decluttering, packing, organizing, and saying goodbye to your previous home will take a toll on you. Although exciting, it might put a little bit of strain on your relationship, especially when you’re not prepared with the costs involved. Again, talk about your game plan for covering expenses on the actual move.
Buying a home together is a huge milestone in your relationship. While it’s a fairy-tale beginning to a new chapter, don’t overlook the less romantic aspects of the process, including the money talk. Make time for discussing your finances. Be honest, realistic, and open-minded. Soon, you’ll be able to move into the perfect home.