Girlfriend coming to live in MY house - what are the financial implications?

MobileSaver

SoloBurr wrote: »

Thanks, though surely not quite right? If she did start paying towards the mortgage (which she won't) then she will only own a tiny percentage of the house compared to me (I put down a large deposit and have been paying the mortgage for years). As such any increase in the value of the property would surely have to be calculated proportionalty to the total equity we each own?

I can see where you're coming from so substitute the word "equity" for "value".

There is no hard and fast rule and the biggest variable if you do unfortunately split up is how long she's been contributing to the mortgage. There's a big difference in how things will be interpreted if you split up after six months compared to say six years.

My view would be that unless you initially paid a huge deposit (50%+) then if things got nasty in say six years time she'd be entitled to half the increase in equity if she was paying half the mortgage.

Having said all that why not just be completely upfront that she is contributing to half the mortgage and will be entitled to half the equity increase? Seems like a win-win situation to me; you get cheaper mortgage payments, she gets cheaper rent, you both benefit if house prices rise and importantly you're both in an equitable financial relationship which can only benefit your romantic relationship.

P.S. And as it's unlikely house values (and thus equity) will increase by much over the next few years anyway, do you really have much to lose?

Mojisola

It's difficult, isn't it? If she carried on renting, she wouldn't be building up equity in her landlord's property. If Solo rented a room, the lodger wouldn't gain any rights to his property.

Solo - have you talked through signing a Living Together Agreement? http://static.advicenow.org.uk/files/livingtogether-agreements-2010-867.pdf

sonastin

SoloBurr wrote: »

Thanks for the response. Are you sure this is correct though? If we draw up a rental agreement or living together arangement how can paying rent give her any rights to the equity?

The house and mortgage and bills are all in my name. If there is an agreement in place then surely what she pays is just that - rent? Or were you meaning if we had nothing setup officially - in which case I can see your point. But that is why I want to make sure we get it all down in writing etc. having been through a break up with a shared house before I certainly don't want to do that again on a place I have invested my life's savings! :eek:

The difficulty comes several years down the line when she tries to argue that your circumstances have changed since you entered that agreement and it no longer applies. Of course that was what you both intended originally but since then (as examples),
-you lost your job for a few months and she supported you by paying for everything
-you have a child together
-between you both you decide to extend the house and she ends up paying for (e.g.) all the groceries so you have some more spare cash to pay for the extension
-your elderly relative comes to live with you and she gives up full-time working to help with caring

If you are disciplined and revise the agreement at all events which could be construed as giving her an interest in the property, you would be protected but if you let things slide and the relationship turns sour, all sorts of events could be argued as altering the agreement. The initial document helps set out what you were both intending when you entered into the arrangement but it isn't guaranteed protection.

"Having an interest in the property" doesn't solely relate to paying the mortgage. Giving up earning her own money in order to do something for you (raise a child, care for your mother, do your cooking and cleaning like a 50's housewife) could give her an interest. Carrying out home improvements which could increase the value of the property could give her an interest. The only way to be completely protected is to not let her live there in the first place so you have to be pragmatic about it and not fear the "what ifs". And be fair to her if it does go sour and she has made some sort of realistic contribution.

SoloBurr

MobileSaver wrote: »

Having said all that why not just be completely upfront that she is contributing to half the mortgage and will be entitled to half the equity increase? Seems like a win-win situation to me; you get cheaper mortgage payments, she gets cheaper rent, you both benefit if house prices rise and importantly you're both in an equitable financial relationship which can only benefit your romantic relationship.

P.S. And as it's unlikely house values (and thus equity) will increase by much over the next few years anyway, do you really have much to lose?

Wouldn't this arrangement also mean she is entitled to all her mortgage payments back too (less interest)?


It sure is tricky. I hate the situation. :mad: I often think it would be better for me just to get a lodger (be it her or someone else) and keep it straightforward. No risk to my property etc,

Then when the relationship has lasted a little longer and I'm more sure it's the real deal we can look to properly share a place we buy together 50/50.

Then again as sonastin says, you can't really live you life by "what ifs". It's just having been through 2 long term relationships ending and the problems property can cause, I would just rather cover myself.

Mojisola - Thanks: I have downloaded the docs and started reading them. Annoyingly (but understandably) they focus more on the tenant rather than the homeowner.

hazedaze

I have been looking into this myself recently as I have found myself in a simiar situation, albeit the other way around. I got a free will with my house insurance through the AA and whilst I was looking through their legal documents section found another document that was for living together. It outlines who will pay for what and who will have an interest in the property if the relationship does not continue. It also states who owns what when regarding big ticket items like sofa and electricals.

I can't remember the price off the top of my head but it wasn't that much to go through the document and complete it yourself, and for a small extra fee it is checked over by a lawyer to ensure that it all looks ok.

HTH