How your marriage contract influences your bond application

Article summary

• The type of marriage contract determines the nature of property ownership, and whether purchasing a home with a home loan requires the consent of both spouses.
• Marriage doesn’t affect credit ratings, but can come into play when jointly applying for a home loan. If one of you has a very poor credit score, it will most likely result in the home loan application being declined. In that case, it is better to apply for the bond only in the name of the spouse with a good credit score.

Two of the most important commitments you can make; marriage, and buying a home. The two are also inextricably linked; not only does marriage increase your incentive to buy a home, but the marriage contract comes into play when applying for a home loan.

For all the romance surrounding marriage, it’s important to remember that the marriage contract is indeed a contract, with all that it entails.

The type of marriage contract, and why it matters

The marriage contract can be one of three regimes:

• In community of property.
• Out of community of property.
• Out of community of property, with accrual.

In community of property

Assets of the married couple, including property, are merged. This includes any homes purchased before the marriage. Furthermore, both spouses will have to consent to any future bond applications.

On death or divorce, the assets are divided equally between the two parties.

In community of property is the default option, meaning that if you don’t specifically select one of the other two options, the contact agreement will assume in community of property.

Out of community of property

This option requires the married couple to draw up an antenuptial contract, which will determine the terms of the arrangement when it comes to assets such as property.

The antenuptial agreement will specify with or without accrual. If without accrual, the assets of each spouse are kept separate, and if death or divorce occurs, each spouse retains ownership of their own assets.

Out of community of property arrangements, whether with or without accrual, do not require both spouses to consent to future property purchases.

Out of community of property, with accrual

This means that assets purchased before the marriage are kept separate, but assets “accrued” during the marriage are jointly owned (unless otherwise specified in the contract).

On death or divorce, the spouse who has accrued less net worth in assets during the course of the marriage can claim against the spouse who has accrued the greater amount, for 50% of the difference.

How does marriage affect my credit score?

Marriage will not merge your credit scores; each spouse retains their individual credit scores.

However, if you jointly apply for a bond, if one of you has a very poor credit score, it will most likely result in the home loan application being declined. In this case, as long as you are not married in community and the applicant with the good credit score can afford the bond repayments on his or her own, then the home should be bought in their name so that the bond application can be done in their name. This will improve the chances of a successful outcome. You can find out your credit score by using ooba Home Loans’ free, online tool, the Bond Indicator.

Before buying a home…

When you’ve made the decision to commit to a home purchase, bear in mind that ooba Home Loans offers a range of tools that can make the home buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.