I'm not going to comment on how fair the deal is - that's entirely up to you and your family. I will say something extremely important.
Whatever deal you work out, get it written up by a lawyer and signed by everyone.
Ten years down the line it is very frequent to find that different people have different memories of what was agreed. And with an investment of this size, one side can find they are hundreds of thousands of dollars out of pocket with no recourse. That can not only make you very poor, but also cause an irrevocable split between families. You can find yourself with no money and never speaking to your family again.
Also ake sure everyone understands the consequences of what happens in all possible circumstances.
There are plenty of things that might happen that could spoil your plans. You need to know in advance how they will be handled. What happens if one party or the other stops paying their share of the mortgage payments, and the bank forecloses? Now there is no equity to be shared out. Are you happy with getting nothing back in those circumstances? What about if your wife's sister and husband have to move and sell the house at a loss? Are you OK with getting nothing back then too?
If the only reason you are doing this is to save refinancing fees, then it might not be worth it.
EDIT: I said I wouldn't comment on the fairness of the deal, and whatever you think is fair is fair for you, but if this were a commercial deal your wife's sister's family would be paying you rent for the half of the house that you own. You are essentilly giving them that rent. What happens when the mortgage is paid? Are they going to keep living in a house you half own and not pay you rent?