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If you're considering purchasing property with a partner, you need to consider what could go wrong, and be prepared for the worst.
Blogger: Richard Symes, CEO, Credit Repair Australia
Valentine's Day has come and gone.
However, one curious effect seems to occur a fortnight following Valentine's Day that may be surprising, and even disturbing!
The start of March heralds peak season for relationships to break up, at least according to a US study based on changes to relationship status on Facebook.
Which seems odd, given just how expensive Valentine's Day can be. Purchasing a bouquet of flowers, booking a fancy restaurant, picking up chocolates and for a few romantics, even a diamond ring, can leave many clutching at the purse strings! It seems counter intuitive to shell out the expense if a break up is around the corner.
Or perhaps the break ups are due to lack of expense and effort on 14 February!
The cost of a break up is much more than the effort to change your Facebook status though. There are emotional and social costs that come into play. However, the one cost that is not normally considered is that of STD - ‘sexually transmitted debt’.
For those couples that have separate bank accounts, mortgages, credit cards and/or personal loans, STD infection is unlikely. However, for couples that have combined debts, then there is a real chance of STD being an issue!
We see countless Australians each year that fall into this trap…their relationship has faltered, and now one has inherited the debts and pay the bills that formerly were the combined responsibility of the couple. Saddest of all is when a mortgage that could be managed with two incomes, is now solely left in the hands of one person to pay, as their spouse/ partner has abandoned the relationship.
Even if the break up occurred years ago, a late mortgage or loan repayment in excess of 60 days, perhaps during that initial emotional and turbulent period of the break up, could still hamper your real estate ambitions today, independent of how financially capable and responsible you are now.
Similarly, we encounter many people that accrued a black mark on their credit file due to being a guarantor on finance for a former partner. It may be that they guaranteed a car loan and their ex partner has defaulted on their obligations. In due course, this loan becomes the responsibility of the guarantor and an extra repayment of this kind can cause difficultly to meet all financial obligations, forcing them to default.
So how can we limit contracting this type of STD?
Our advice is simple. Prevention is better than cure. Hence, act before finances could become a problem.
If you are at that stage of the relationship when you are considering a significant joint financial purchase or guaranteeing a loan for your partner, then you need to have a serious conversation detailing financial history – what is their debt position? What is their disposable income? What are their current financial commitments? And importantly, although it may be uncomfortable, you need to ask what would happen if the relationship ends.
In addition, put all financial commitments or agreements between you and your partner in writing.
If however you do become the victim of STD, and you find yourself with a bad credit rating, you should speak to a professional to see if it can be restored.
Debt refers to the amount of money borrowed from a creditor with the intention to pay back at a specified date.
An estate refers to the assets a person owns at death that could be used to pay their debts, including all personal property, real property and other liquid assets.
An estate is the value of an individual’s net worth including assets, properties, financial securities and other valuable assets.