Letting a partner in on home ownership gradually

Question

I have owned my house for 10 years. My boyfriend has been living in it for nearly two years. So far he hasn't been paying anything towards the mortgage. We split bills and council tax 50:50. This suits me fine, but the point of the arrangement was so that if living together didn't work out, it would be fairly simple for him to move out and me to keep my house. Now it's been a while and nothing has gone horribly wrong, and it occurs to me that while most of my savings are invested in a nice house in a pleasant part of a densely populated city, most of his savings are in a savings account that isn't really making much interest. The fixed term of the mortgage is coming to an end soon, so I will have to go to a mortgage review anyway. Perhaps I should be nice and offer to let him in on the home ownership.

My boyfriend is trustworthy but we are not married or engaged or anything so the relationship could end at any point. If he starts paying money onto the mortgage, will the house just suddenly belong 50% to him? Or is there a way of letting him in on the ownership gradually, in a way that would be fair to both of us? I would have thought this was a fairly standard thing, but I haven't found any formulae for how it could work. If I pay £X per month and he pays £Y per month, how could we work out what percentage of the house he owns at any given point?

I have got the mortgage to below 50% of what I originally paid for the house, but I am still concerned that if he moves out I would not be able to pay him 50% of the house price without selling the house and moving out myself. I like my house and while my boyfriend is more important, I'd really rather avoid losing both.

Answer 1

If he starts paying money onto the mortgage, will the house just suddenly belong 50% to him? Or is there a way of letting him in on the ownership gradually, in a way that would be fair to both of us?

You really need to talk to a lawyer, but it should be possible to write a contract between the two of you which allows for proportional buy-in.

For example, if the house is valued at £300,000 and he gives you £15,000 then he owns 5% of the house. If he pays half of the mortgage that month and it turns out to be 0.75% of the value of the house, then he owns 5% + 0.75% = 5.75%. If he pays half the mortgage the next month, he'd then own 5.75% + 0.75% = 6.5%.

If you all split, though, you would have to buy him out. (You could save for that by putting whatever money you don't spend on the mortgage into a savings account for just this possible occurrence.)

But all that needs to be hashed out between your lawyer and his. (It very well might split you two apart.)

Answer 2

It sounds a bit cold but the least complicated thing to do is to charge your boyfriend a modest amount of rent. And if not labeled rent then some contribution on his part that eases your financial burden such as paying the utilities. After all, he's living rent free. This way, if the relationship tanks, there's no legal entanglement.

The fixed term of the mortgage is coming to an end soon, so I will have to go to a mortgage review anyway.

Being a Yank, I don't know what this means. Refinancing? If yes and if you want to "let him in on the home ownership", I'd consider two possibilities:

(1) Have your boyfriend obtain a loan for 1/2 the appraised current value of the home and you finance the other half (whatever the balance is) Since you stated that you have "got the mortgage to below 50% of what I originally paid for the house" then that might be the end of the mortgage payments for you. Now you're both owners and he pays off his loan. As an aside, if the home has appreciated, you're selling 1/2 at a profit.

(2) Similar to (1) but you sell him half the house and you hold the mortgage at current rates. He makes the mortgage payments to you (some income).

In either case, you should work out agreeable terms and then use a lawyer to put it into a contract with provisions that protect both of you should the relationship end or become adversarial. Don't let love or current 'trustworthiness' affect good business judgement.

I think the gradual ownership idea is too clever by a half. Don't try to reinvent the wheel. He takes a mortgage for 1/2 the home and he is responsible for that.

A long time ago I bought a house with a girlfriend. With contract terms that were tight and protective, there were no issues with division of assets when it was over. It was all spelled out at a time when we were reasonable :->)

Answer 3

My boyfriend is trustworthy but we are not married or engaged or anything so the relationship could end at any point.

Consider letting things stand as they are while the relationship is still at this ‘phase’, for want of a better term.

I like my house and while my boyfriend is more important, I'd really rather avoid losing both.

Home ownership has various aspects to it, including financial and sentimental aspects, among others.

Financially, buying into a property is an investment. Given the risk appetite that investment requires, there could be other investments of similar risk that your boyfriend could consider, such as property trusts. If your boyfriend invests in something that at least matches the mortgage interest rate in after-tax dollars, then you’re not (jointly) missing out on the financial benefits of him helping to pay down your mortgage with the same funds.

You can revisit the issue of proportional ownership when the relationship progresses to a stage you’d consider to be more certain than something that “could end at any point”, with your boyfriend’s investment liquidated to form a lump sum payment into your mortgage.

This also addresses the sentimental aspect by not placing your property at risk in the event the relationship ends.

By starting off with your boyfriend contributing to bills and investing in a similar but unrelated asset or fund, you are gradually introducing some aspects of home ownership and preparing meaningfully (in a financial sense) for a time when you are fully prepared to share legal ownership of the property.