Want to Live Together? Think About It....

The Observer's Look before you leap into financial bed together has some points that apply as well over here as in England:

Young couple worrying over bills

Combining finances can seem like a good idea, but it also has its pitfalls.

Are two heads always better than one? Combining your finances might seem like the perfect way for newlyweds, civil partners or couples in long-term relationships to shinny more swiftly up the financial drainpipe, but dangerous obstacles can damage the prospects of a new duo: a crumbling credit rating, lower pension payouts and liability for bad debts if everything turns sour. So here's our guide to when it pays to join forces - and when it's better to go solo.

Current account

A joint current account to pay all the bills might make sense when tracking your finances, but it's not the most robust protection against ID fraud. "If you both only have one account, you could be cleaned out with no reserves to fall back on," warns Andrew Hagger of the price comparison website Moneynet.com.

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Life insurance

The monthly premiums for a £250,000 joint policy are usually slightly lower than for two separate £125,000 policies, but other concerns could favour sticking with single life cover, brokers warn.

"If you end up separating at some point, single life cover means you'll still be able to keep your original policy," says Emma Walker of Moneysupermarket.com. A joint policy would have to be abandoned for cover as a newly single person and, if you were old and in failing health, you'd end up paying heavily for new cover.

The same principle applies, says Matt Morris of broker Lifesearch, if either spouse with a joint life policy were to die. "If one of you dies, although a joint policy will pay out more in a lump sum, the surviving spouse will have to take out new life cover; and if it's years after the original policy, it could be more expensive because of your age and health," says Morris.

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Mortgage

Doubling up on your salary can allow you to borrow much more than would be possible if you were on your own. Although mortgage lenders have moved towards "affordability" for loan assessment, income multiples still have clout. "Apply as a couple and you'll typically now get three times your joint income although, in places, four times is available," says David Hollingworth of broker London & Country.

However, joint mortgages bring hefty legal responsibilities if the relationship runs into the sand, he adds.

"If you have a signature on a joint mortgage, you're jointly and severally liable for the payment: if either of you cannot or will not pay, the lender can come after one or the other of you." 

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Debts

Love me, love my debts. Any joint credit agreement will leave you without any wriggle room. It's all about joint liability: if you split up and owe money on credit cards, a car loan or personal loans, they'll have to be paid off. Even if your other half defaults on payments and has their name on the bill, each borrower is responsible for - and can be chased for - the debt, including bills for gas and electricity, council tax and the telephone.