1. Do we both equally assess our financial situation?
The first step is to openly evaluate the overall financial picture. According to L. Žukovė, it is important to discuss not only the income received but also existing financial obligations, savings, regular expenses, and financial goals.
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“Couples often talk a lot about the location, size, or interior of a future home, but much less about their financial habits. The clearer both understand each other’s situation and expectations, the easier it is to make a decision about the loan amount and monthly payments,” says L. Žukovė.
She emphasizes that the bank evaluates the financial situation of both co-borrowers, so by assessing your capabilities in advance, you can plan more accurately and avoid disappointments.
2. How will we share the monthly payments?
Responsibility for the housing loan falls on both co-borrowers, so it is important to discuss how to share financial obligations and other housing-related expenses between each other.
“It is important that the division of monthly payments corresponds to the real financial capabilities of both partners. If the loan burden becomes disproportionately large for one, over time it may become harder not only to cover daily expenses but also to continue saving or pursue other financial goals. Therefore, it is worth choosing a model that will be sustainable for the entire loan period,” notes the head of financing at Luminor bank.
3. Do we have a financial reserve?
When planning to purchase a home, a lot of attention is given to the initial down payment, but it is equally important to assess how much savings will remain after the transaction.
L. Žukovė advises not to allocate all accumulated funds for the home purchase and to maintain a financial reserve that would help cover at least a few months of essential expenses and loan payments in case of unexpected income reduction or unforeseen events.
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“When assessing readiness for a housing loan, it is important to think not only about whether financing can be obtained but also about how the household budget will look after the transaction. If all savings have to be allocated to the down payment and home purchase, even small unexpected financial shocks can become a challenge. Therefore, a financial reserve is no less important a part of preparing to buy a home than the initial down payment itself,” notes L. Žukovė.
4. How do we both assess financial risk?
Different people assess financial risk differently. One partner may find it completely acceptable to borrow the maximum possible amount and allocate a larger share of income to loan payments, while the other may prioritize maintaining a larger financial reserve and more flexibility for daily expenses or savings.
For this reason, L. Žukovė recommends discussing not only how much can be borrowed but also what size of financial obligations feels comfortable for both before making a decision.
“It is important not only how much the bank is willing to lend but also what size of financial obligation is sustainable for the household itself. A larger loan may allow purchasing a more expensive home but at the same time reduces financial flexibility in the future. Therefore, it is worth finding a balance between today’s needs and the ability to maintain a stable budget and pursue other financial goals in the future,” emphasizes the expert.
5. Have we considered possible life changes?
A housing loan usually becomes one of the longest financial commitments in life, so the decision should be evaluated not only through today’s income but also future plans.
“As life stages change, the household budget may also change – due to family growth, career decisions, or other priorities. At one stage of life, the most important thing may be to repay the loan as quickly as possible, at another – to accumulate more funds for children’s needs, invest, or plan other goals. Therefore, the housing loan should be such that it allows adapting to these changes and maintaining financial flexibility,” emphasizes L. Žukovė.
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