Shared finances

tinalives

I'm not sure whether I'm posting this in the right place or not - I need advice as to the fairest way of arranging our finances with two mortgages and one house rented out.

My boyfriend is about to move into my house and rent his house out. We both have mortgages on our houses, we both earn roughly the same amount of money.

What is the fairest way of dealing with our income and expendature?

As a starting point we had planned to open a joint account and each pay the same amount into it for all our bills and living expenses at my house - but then there's his house and the rent that will come from that - and the issue of how we would manage things if we were to split up (I know it's not nice, but it's something we have to think about).

Any input would be appreciated.

Thanks.

m_13

Does your boyfriend own the house is going to let out on his own? If he does then he will pay tax on the profit from renting out the house. He can make certain allowable deductions (mortgage interest, letting agent costs, buildings insurance etc) but will pay tax on the rest. That will then leave the profit after tax as income. However, he is paying it towards an asset in the same way as you are paying towards an asset on your mortgage.

I would always recommend a separate joint account to pay 'bill money' and other joint monies into. We have one even though I'm the only one who pays into it! It then pays all of our bills each month and I keep a spreadsheet of where we are and keep track on Microsoft Money of what is coming up. If you make a spreadsheet of what needs to be paid each month and also the annual things - TV licence etc - then both pay at least a 24th into the account each month then this should cover it. Sometimes you need to get a bit ahead at the beginning if an annual bill is coming up straightaway.

In essence whilst your boyfriend's property is rented out he is not paying his mortgage, somebody else is so I think he should contribute towards yours. However, there may be tax implications of your house becoming his principal private residence and him paying towards your mortgage and gaining a possible interest in your house.

I would suggest that he takes good advice about his property and ensuring he keeps within the law on his profit. What is fair when it comes to your mortgage and household costs is another matter. What do others think? We've always just had joint money irrespective of where it is kept and have taken advantage of the fact that my partner has no taxable income so all the taxable savings are in her name so we get claim the tax on the interest back. That works for us but wouldn't for everybody as my sister is horrified and she and her husband keep their funds very separate apart from the monthly amount they pay into their joint account.

It's good that you are thinking about these things. A lot of people don't and then have problems :rolleyes:

tinalives

Thanks M-13,

Yes, he owns his house (well the mortgage on it anyway!)

I also use Microsoft Money to manage my finances! I've used it for a few years now and don't know how I ever managed without it!

My friend has suggested that all the rental income should go into our 'joint account', along with out 50% each towards all the bills etc, and all the expenses relating to both our houses should come out of that account, and the remainder each month split 50/50 and paid off each of our mortgages.

Do you think that sounds sensible? It's so confusing - and all 'just in case we split up'!

clairet707

We own a house which is rented out and we currently rent ourselves though thinking of buying again due to his fab relocation package with his new job

We have 2 joint accounts, one for our daily expenses, our rent and all our bills and one for the house we rent out (the rent goes in, the mortgage goes out and all the house rental expenses also come out)

That way we can keep things completely separate when it comes to tax etc

m_13

I don't think it's 'just in case you split up'. What if you decided to start a family and one of you took time off work? The situation changes then so it's best to make agreements at the start.

I can't stress enough that the rental income will be taxable income for your boyfriend, less the permitted allowances. I would keep it completely separate as clairet707 suggests. If mortgage rates go up and he needs it to cover mortgage payments that the rent isn't covering then you might have problems.

I love Microsoft Money. Have just learnt how to import downloaded statements since we got an Amex for the 5% cashback. Love it matching 100%! Wish they would bring out a new version for the UK though. Other bits of the world have had new versions but they don't work with the Nationwide.

tinalives

So, am I right in thinking that:

1. We each pay 50% of the value of my mortgage and our bills etc into the 'joint account'.

2. My boyfriends mortgage is paid out of a separate account, the same account that the rent goes into and any associated expenses comes out of.
(The rental income will be more than the mortgage and other expenses).

What is the fairest way of dealing with the 'profit' from the rental of his house?

How do we ensure that we have both benefitted equally if we ended up splitting up (God forbid!)?

Again, any input is appreciated.

betti911

My fiance moved into my house last yr (when he was my boyfriend) We have a joint account that only he pays into. We agreed an affordable sum for him. This pays the council tax, our food, sky TV, internet etc. I pay the mortgage from my account to avoid complications. All our other finances are seperate. This works for us as it means that we can manage our own money.

From experience I'd also work out in advance who does the household chores too. That's caused my fiance many more nights on the sofa than money

tinalives

Did he have his own house too? It's that fact that my boyfriend also has a house and mortgage that's complicating things.

Good idea about the chores!

betti911

No my fiance doesn't own his own house at the moment. I think that even if he did he should still pay 'rent' of some description to me as he's living in a flat I'm paying for and if he was renting his house out then he wouldn't need to pay his mortgage.

Another thing to consider is who pays for day to day repairs round the house ie if the washing machine breaks down, the hoover etc.I think you are doing the right thing getting this sorted before you move in.

tinalives

betti911 wrote: »

Another thing to consider is who pays for day to day repairs round the house ie if the washing machine breaks down, the hoover etc.I think you are doing the right thing getting this sorted before you move in.

It all seems like an absolute nightmare - it was originally going to be so simple... boyfriend wanted to sell his house, use the proceeds to pay off my mortgage and to improve my house, then we would both own my house 50/50, and we would contribute to everything 50/50 - simple!

BUT I suggested that he may be better renting out his house rather than selling it when the market is so bad, and only sell it when the market improves, unless he decides to continue renting it out.

Now everything has suddlenly gone from simple to mega-confusing!!

betti911

I thought it was a nightmare at the start too I think you are doing the right thing keeping seperate finances apart from your joint billing account at the start.

The way we handle bills and breakages is that if they affect the day to day running of the flat eg electricity, council tax or if say hoover, washing machine breaks then we half them. If they relate to the actual place itself like the buildings insurance or a roof leakage then I pay those cause its my mortgage/flat. It works for us at the moment.