My ex and I commenced living together in 2006. At that time both he and I were working, but 12 months later he moved interstate and another 18 months after that I joined him: In 2009 we purchased a house together.
The purchase price was $150k, of which he put up $30k as a deposit. Thus the mortgage was $120k. From that point he was no longer working, and I was the sole payer of the mortgage, all gas, electricity and telecommunication bills. He provided monies to undertake immediate renovations to the property (as did I) and his share at that stage was around $15k to my $5k.
So, we have an initial outlay of $30k for deposit, plus $15k from him.
From me there have been mortgage payments of app $42k, plus $5k in improvements.
I moved out 6 months ago, and am no longer making payments towards the property.
If the property were to be sold (and let’s for argument’s sake suggest it goes for the same price as we bought it, 150k), what amount would be reasonable for me to claim?
I was thinking around $20k, but would that be rude of me?
I believe there’s a very simple formula, based on whatever figure the blood stops flowing.
BTW, if you’d walk away for $20k, walk away now else the lawyers are going to take your $20k and hit you with an invoice.
Hah! No lawyers Thulie. At this point it’s moot as my ex is still living in the house and making payments etc, but I SUSPECT that one of his rellies is going to up and buy the house outright which will see me getting paid out. Just wondered what sort of $ amount would be reasonable.
Yus, I am a reasonable person despite media reports that I ain’t.
You can likely find (or build yourself, if you’re Excel inclined) a PMI* schedule showing how much principal/interest you’ve paid (and will pay) for the life of the mortgage, by payment. It will look something like the following example:
etc, etc until the end of your mortgage (so that a 30-year mortgage will end at month 360, for example.)
You lose the interest, of course, but the principal represents the amount of equity you’ve paid into the house. So add up the principal payments on those months which you paid the mortgage and that should (in addition to your portion of the down payment) represent your equity in the house.
Disclaimer: I am not a lawyer, I am not your lawyer/accountant/financial advisor/etc, and the above is merely advisory in a “Dear Abby” kind of way.
*likely not the right phrase - “payoff schedule” is what it says on my banks (Wells Fargo) website.
I can see why. If one person has put more money into the house than the other, why should they get the same amount back?
I don’t see why you don’t just add up the monetary contributions from each person to get totals X and Y, take the value you get from selling the house, V, and assign X/(X+Y)*V to one person and Y/(X+Y)*V to the other.
Sure, some portion of the payments made was for interest and didn’t build equity, but I don’t see that that matters. A certain amount of money was paid in maintenance of an investment.
I was thinking this, too. From the OP, it sounds like you’ve paid roughly equal amounts into the house over the years, so you should get equal amounts back, no?
(I have a head full of flu at the moment so if I’ve missed something obvious, sorry!)
But they were living as a married couple, weren’t they? Essentially common law, right? Why wouldn’t the same rules apply? It’s not like they were roommates or business partners.
If a husband and wife divorce, where the wife was a stay at home mom and the husband worked, does the wife get nothing because she contributed zero dollars?
Don’t forget to weigh in the tax impact of paying the mortgage during the time you’ve owned the place. Who took that mortgage deduction? On second thought, I seem to recall you’re in Australia in which case that probably doesn’t apply, but there may be other considerations I’m not familiar with.
Honestly, it sounds like all in all you’re pretty close in how much you’ve laid out, and it’s probably simplest to just split the proceeds evenly.
Note that if a relative is purchasing the place, that may affect how much it sells for - for example, lower real estate commission = lower price. Make sure the relative purchases it for something close to its fair market value!! Or if less, then ask that you be compensated for some of that difference.
I would suggest both of you getting your original investments back, and let him keep any of the remainder (should there be any). This is, of course, assuming the house sells for more than what is owed - a big “if” in this economy, and doubtful!
Otherwise, it seems fair to pretty much split whatever “profit” is made in the selling of the house.
That said, if there is no profit whatsoever (more likely), then you are kind of screwed and you don’t know for sure if there might have been some under-the-table deal to allow relative to swoop in and get a great deal on the house. But if the sale is simply to get rid of the place - no profit no loss - then just consider yourself lucky you don’t owe anything and consider the whole venture as “just paying rent” and walk away.
I don’t think they were living as a married couple; they were closer to roommates. It sounds like they kept their financial lives separate throughout the period.
I’m confused. If you made $42k worth of mortgage payments, then how is the mortgage at $113k? It should be $78k, right? Was there $41k in interest over four years?
Personally - I don’t think you should get credited for principal only - I think you should get credited for both Principal & Interest - and really can’t think of a reason you shouldn’t get credited for the taxes and insurance too. If you got principal only - you’d be talking about almost nothing.
In theory - I think his contribution would be weighted higher - as he had it in earlier - so we are talking about time value of money, but interest rates have been low - and we are only talking about ~ 4 years.
If his relative is paying close to market value - you are saving on a real estate agent. It sounds to me you guys are about equal. I’d probably go for a 50/50 split - of whatever the profit is - even if you are talking 55/45 - just for the sake of harmony and all that. Of course - he might have some unrealistic expectation of what he should get - so if you think this is the case - you might want to approach it with a higher demand.
If the OP wants to get “credit” for principle and interest, and the equity has only accrued by $7k in the four years they were making payment, then there won’t be enough money from the sale of the house to meet the OP’s demands. (150-113=37)
A 50/50 split would leave the OP $18.5k, well short of $47k.
In short, the money isn’t there to reimburse the OP for the interest and escrow on the mortgage payments. Since the OP’s hubby had contributed $30k to this equity, it will be argued by him (and/or his attorneys) that he should at least get his $30k back, leaving the OP with $7k.
I know she can’t get the money back, but I think the percentage split should be the same.
Assume she puts in $30,000 into a checking account - and he does as well.
His $30k is used for the deposit - hers are used for the payments. They both are $30k worse off than they were before.
It can be argued by her as well that she should get her full $30k back. Neither one is going to - but there isn’t really a reason that there contributions shouldn’t be considered equal - other than one is broken up into P/I + taxes and insurance.
Another way of looking at it is - if he wanted to buy her out (essentially that is what this is)- is it fair that he basically only has to pay the principle amount of four years? He is basically getting four years of interest (which the way it is amatorized is huge) - for free.
To me the only difference is that he could have invested his 30k for four years and made slightly more money by having to pay out monthly payments like she did. However - interest on this would be compounded off the 30k (and go down each month with each payment) and not the full 120k up front and scheduled the way it is.
He didn’t have to pay any of the taxes or insurance.
If he wrote a check for the principal each month - and her for the interest - would it be fair that she got nothing?
I understand the BANK can’t credit her for the taxes, interest, or insurance, but these are real costs - and I think he should.
The relative investment amounts are so close the difference is practically just noise at this point. 50/50 of the net proceeds would be by far the easiest way to go assuming the house sells very shortly.
Per the OP’s note of it being a sale to relative this assumes there is no agent involved and the buyer is handing the bank points and any transfer taxes (the contract needs to specify this - I have no idea how property transaction costs or fees run in AU)
Bottom line to divide net proceeds evenly seems fairest and easiest.
I have no idea what price the house would sell for if sold at today’s market. There is an oversupply of housing in regional areas of Australia (many houses in our town have been on the market for 2 + years), so whilst I’m ‘assuming’ we would sell at the price we paid, there is no guarantee…given the improvements, it might sell for a higher amount: who knows??
Yes, we were living as a married couple for all legal and social purposes.
The principal was $120k. I made $42k worth of payments over nearly four years. The principal is now $113k. You do understand how mortgage interest works, yes?
Look, I’m not all that fussed. I’d really like to get some recompense if the property is sold, but I’m not about to go all legal or mental over it. As DMark mentioned upthread, I had a great place to live for a few years, and I could consider it just rent. But if there might be a few bucks to throw my way, I wouldn’t dodge to avoid catching it…if you get my drift.
