Open conversations about finances can be very difficult in relationships. This includes conversations about what we might expect to inherit or be gifted from parents in the future. It is very common for home-owners to release equity to give to children and this can be one of the rare times that the whole family, including couples, have an open and frank conversation about the best way to manage finances.
We would like to share a few tips on how to manage your personal finances as a couple.
Try not to treat the subject as taboo. Not all couples talk about their personal finances but it is a healthy habit. Different couples have different approaches. While some share all income and expenses and create a joint account, others maintain separate accounts and split all bills. Regardless of the approach, it is important to have an honest conversation about important financial decisions.
Couples who are close to reaching pension age might be looking into financially securing their future. Equity release might be something they should be looking into. However, there is often not enough education on the topic of equity release and couples. Equity release are a range of financial products which let people above the age of 55 access the equity of their property as a lump sum, several smaller amounts or both. Married couples can release equity from their home as co-borrowers on the condition that both spouses meet the lender’s requirements. If a married couple releases equity that means that each spouse would have an equal share in the equity as well as an equal responsibility to repay the debt.
It’s important to be noted that the decision whether to take out a joint home equity loan depends on each one of the spouse’s creditworthiness which affects the ability to take out a loan. In case one of the partners has a better credit score than the other one, they might be able to release equity on their own. A good credit score normally translates to more favourable conditions and a lower interest rate. If only one of the spouses takes out the loan then they will be the only one responsible for the loan.
Here are some important things to remember about equity release as a couple. A spouse does not need to be listed as a co-borrower. However, even though it is not necessary for a spouse to co-sign, they still may be required to consent to the loan in writing. Another important thing to remember is that if a married couple took out an equity release loan as co-borrowers and if one of the spouses passes away, then the other one is still responsible for paying the debt. Furthermore, an unmarried couple who own a property together can also take out a home equity loan jointly as long as they both have been approved by the lender. Lenders have to treat unmarried couples the same as married ones and cannot deny a loan based only on marital status. Before making the decision of taking out equity release it is important to do enough research into the different types of products on the market in order to make an informed financial decision.
