Has anyone's OH paid off their mortgage?

74jax

I don't want to post this on the 'mortgage board' as it's not actual 'mortgage' advice we're both after.......

I own my own home (mortgaged) and my OH owns his appartment (non mortgaged). OH moved into 'my' property last May and we now live together and are renting 'his' property out (although no tenant at the moment). My OH is wanting to pay off my mortgage for me as he has the money in his account not gaining a great deal of interest and feels it would be better spent on paying off the mortgage.

On the surface, I guess to some this would seem ideal. However, my partner is concerned 'should' we split in say 10 years, how we would deal with the split of the property. Before you all jump in with comments of lack of commitment and talk of splitting, I think this is reasonable to sort out now, before the mortgage is paid off.

He would need to pay around 43k to clear the mortgage. Which in todays market would be around 1/3 of the house. So we thought we could have drawn up an agreement that I own 2/3's of the house and he owns 1/3. However, in the circumstance that we do split in 10 years, that would mean I need to take a mortgage out for 1/3 of the house to pay him back his 1/3. And would be stuck with a mortgage again for say (if prices are the same) 43k. I only have 16 years left on my mortgage, so if we continued as we are, I would only have 6 years left to run in 10 years time, instead of starting up a new mortgage.

I feel he is 'loaning' me the money but could call it a day (and so could I) and the money is then requested at any given point.

There's two side to this, we can both can see the other's side, but wondered if anyone has been in this situation and how they dealt with protecting their future, should we unfortunately split.

I'm in no hurry for him to pay it off, and suggested he maybe look at buying somewehere else if he feels he can get more return on property than in the bank, but he sees it as if I have a mortgage why doesn't he pay it off.

We are not married and not likely to in the future.

Any thoughts?

Alikay

Yes, keep your properties and finances separate. Obviously it's not on for him to live rent-free in your place whilst trousering any incoming rent from letting his own, but I'm sure you can sort something out fairly. Him paying off your mortgage because safe investment returns are currently low will only lead to hassle "if" you split up. What he's basically suggesting is a kind of "equity share" on your property....would you be happy with a bank doing this or did you buy the house intending it to be yours entirely once the mortgage was paid?

74jax

Alikay wrote: »

Yes, keep your properties and finances separate. Obviously it's not on for him to live rent-free in your place whilst trousering any incoming rent from letting his own, but I'm sure you can sort something out fairly. Him paying off your mortgage because safe investment returns are currently low will only lead to hassle "if" you split up. What he's basically suggesting is a kind of "equity share" on your property....would you be happy with a bank doing this or did you buy the house intending it to be yours entirely once the mortgage was paid?

Thanks for the reply.

I bought the house 8 years ago, before I met him and he moved in May last year. To be honest, I didn't really think of anything but it being entirely mine when I purchased it.

The problem we have is him protecting the money paid in the house, and the possibility of me having to start afresh with a mortgage in the eventuallity of splitting.

belfastgirl23

It sounds to me like you want to keep your house as yours. Which is perfectly understandable. I think you need to just say to him that you think it's best to keep things seperate.

Or if you really wanted you could continue to put your mortgage money into a high (!) interest saving account so that at least if at any point he decides he wants to 'withdraw' the money you can repay him...

74jax

belfastgirl23 wrote: »

It sounds to me like you want to keep your house as yours. Which is perfectly understandable. I think you need to just say to him that you think it's best to keep things seperate.

Or if you really wanted you could continue to put your mortgage money into a high (!) interest saving account so that at least if at any point he decides he wants to 'withdraw' the money you can repay him...

I don't really think of the house as 'mine' and his appartment as 'his' anymore. I did when we first moved in, but after time do see everything as 'ours' and any problems that come up 'we' just sort.

We have decided to continue seperately, neither of us really minds and are happy how we are, I just thought maybe someone had a wonderful solution that they used and we could apply to our situation :T.

The idea of putting money into an account isn't really the reason he wants to do it. It's so that I have more disposable income each month, rather than an extra bill. I should maybe say, all household bills are from one account and we each pay into that account money to pay them, so in a way he is paying from his savings each month to pay towards the bills, when he is thinking we'll just get rid of the biggest one.

Mrs_Z

Hi, I can see the sense of him wanting to get a better return on his 'spare' money but could he not just pay 1/2 your mortgage payments (+bills) as 'rent' whilst he's living with you which is extra income for you that you can use overpay your mortgage. With this arrangement he would not have any claim to your property but you could make extra payments towards your mortgage. It does not solve his dilemma though to deal with the 'spare' money. Maybe he could buy another property as a buy-to-let????

JodyBPM

Could you not get an offset mortgage, and then he could place the £43K in an offset account. If you split up, he could take the £43K back out, and you would continue to pay the interest on the original amount. I've never had an offset mortgage before, so I don't know the ins and outs of them, but think that it could work. He would only get his original amount back out, though, not a % of the house, so for him it would actually be a bad investment, as he would be effectively lending you £43K interest free.

smartpicture

At the moment you own not just 2/3 of the house, you also own all of it apart from 43k. If you stay as you are, you will still own 2/3 and all of it apart from 43k (or less, if you're paying off the capital too). If you split up in 10 years time and deal with it as he suggests, you will still own 2/3 of the house - but the one third you don't own is likely to be significantly more, say 86k, so you'd have to get a much bigger mortgage then to put yourself back in the position you are now.

Not sure if I explained that very well, but bottom line is I think you'd be better off short-term and worse off long-term if you split.

smk77

74jax wrote: »

He would need to pay around 43k to clear the mortgage. Which in todays market would be around 1/3 of the house. So we thought we could have drawn up an agreement that I own 2/3's of the house and he owns 1/3. However, in the circumstance that we do split in 10 years, that would mean I need to take a mortgage out for 1/3 of the house to pay him back his 1/3. And would be stuck with a mortgage again for say (if prices are the same) 43k. I only have 16 years left on my mortgage, so if we continued as we are, I would only have 6 years left to run in 10 years time, instead of starting up a new mortgage.

Why not carry on paying what you are paying into your mortgage into some other investment? So, if you do split up you don't need a mortgage of 1/3 of the property value to pay him off?

If you were to come up with an agreement, you need to make sure that you're protecting yourself from the splitting up scenario rather that just just giving yourself a lot more disposable income now. In the scenario you mentioned above, you will be financially much worse off - your partner will therefore be financially much better off as he'll have a return from his "investment" and has probably spent 10 years enjoying the extra disposable income that you would have had by not paying your mortgage...

minimoneysaver

Just a thought and I can't see that anyone else has said this, if he is paying you rent, technically you have more 'spare' money each month. Why don't you over pay your mortgage and have done with it much sooner than you would if you continued paying out what you already are.

clearingout

what about he gives you the money, you pay off the mortgage with it and you draw up an agreement that says he'll get his £43k back plus an agreed amount of 'interest' based on the value of the house when you split up (so £43K plus 5% of property value?). Is that workable? That way you wouldn't have to potentially take out a huge mortgage in the future but could enjoy mortgage free living now (and as a cynical, divorced owner of property myself, I would be putting some of that money away each month 'just in case'). I'm no expert - there are probably more cons to that than pros but it seems a shame to pass up the opportunity if there's a way round it.