Why do millennials choose a mortgage over a marriage?

Annie Button has written an article looking at why it is that millennials appear choose taking out a mortgage over marriage.

Priorities appear to be shifting for millennials aged 25 to 40 when it comes to settling down with their chosen partner. It may be a matter of necessity rather than choice in the face of high costs facing those wishing to get married and buying a home together.

Saving up for a deposit on their first property and a dream wedding is a hard task, especially when interest rates are at a historic low, wages are stagnant and rents are high. Many couples simply cannot manage financially to do both at the same time, so important decisions need to be made.

How much does it all cost?

According to the UK Wedding Report 2021, the average cost of a wedding in the UK was £20,731 in 2019, plummeting to £14,422 in 2020 as a direct result of the pandemic. However, the report concluded that “wedding costs rise with guest numbers, and 2020 figures were on a par with the previous year when guest count is taken into account.” Weddings were prohibited and then severely curtailed in terms of numbers during several lockdown periods. A survey carried out by Stowe Family Law found that nearly a quarter of 18- to 24-year-olds believe that £25K+ represents a sensible wedding budget during normal times.

On the house buying front, mortgage rates have been at an all-time low, which should be good news for first-time buyers. However, “the most competitive rates are reserved for buyers with chunky deposits of 40% or more,” explains one property expert, and therein lies the rub.

Deposits for property purchases have risen in the last few years. Although the standard amount for an exchange deposit is 10% of the property price, official statistics report that in order to get a mortgage, first-time home buyers need to save up for a deposit of about 22% of the property purchase price.

According to one mortgage lender, the average deposit paid by first-time buyers since 2020 is £62,572 (and at least twice that in London), representing an average of 18.6% of the property value. Little wonder, then, that the average age of a first-time buyer in the UK now stands at 34 years old, a sharp increase from the 2007 average of 28 years old.

Mortgage over marriage

With budgets impossibly tight, important decisions need to be made to allocate finances where they matter most. Many millennial couples now feel that getting on the property ladder is the more pressing issue, while getting married takes a back seat. According to the Halifax, nearly two thirds of 18- to 44-year-olds believe that owning a home is more important than tying the knot, and this percentage rises to 70% among younger adults.

What’s more, our wider society seems to support this priority with a variety of highly promoted financial incentives such as Stamp Duty exemptions and Help to Buy schemes available for first-time buyers. Then there’s the concept of The Bank of Mum & Dad – now a widely accepted option for those lucky enough to have affluent parents willing to help out.

The COVID-19 pandemic has undoubtedly also had a marked effect on reviewing lifestyle choices among cohabiting couples. With several lockdowns focusing the mind on the home front, and wedding plans having to be cancelled, postponed or curtailed, millennials are now prioritising homes over marriage.

Prioritising long-term security

With the global economy thrown into disarray by the pandemic, many couples are now even more determined to pursue their dream of home ownership over other important life milestones such as getting married and having children.

Escaping the precarious nature of living in rented accommodation  by getting a foot onto the property ladder is seen as a sensible move to lay down secure foundations for a healthy future together. Instead of saving up for a big wedding celebration, many couples instead put their savings and energy towards buying their first home.

What’s more, this shift is not just a UK phenomenon. “84% of American millennials think owning a home is a crucial part of the American Dream,” says a recent Bank of America study, while three quarters believe home ownership is more important than other major life goals and events including getting married and having kids.

Co-habiting and co-owning property

Teaming up with a partner can make home ownership more affordable, and buying a property together certainly constitutes a long-term investment in the relationship as much as it does in real estate. In fact, nearly half of respondents in the Halifax survey mentioned above felt that a joint mortgage constitutes a bigger commitment than marriage.

The obvious risk is that, in a desperate rush to get onto the property ladder, it’s all too easy to rush into a joint property purchase prematurely. Cohabiting couples don’t enjoy the same legal rights as married couples in the event of a relationship breakdown, and owning a shared asset can lead to messy and complicated situations, not to mention financial loss.

Unmarried couples considering a joint home purchase would do well to take legal advice to achieve the right type of home ownership that accurately reflects their individual financial contributions.

There are two main ways of sharing ownership: ‘joint tenants’ and ‘tenants in common’. Joint tenants act together in all matters, cannot sell their ‘share’ to anyone else and their interest passes to the other person automatically upon death. Tenants in common each have a defined share of the property, which is useful if one partner is putting in more money. Tenants in common can sell their shares separately, and their interest in the property passes to their heirs upon death.

Cohabiting but unmarried partners who buy a home together must express a wish to be tenants in common, since there is a legal presumption of joint ownership. Both partners should also seek separate legal advice and draw up a Declaration of Trust that states how and when the property can be sold, so that both their interests are protected in the event of a break-up.

Kindly shared by Annie Button

Main article photo courtesy of Pixabay