Not to contribute to mortgage?

[StopItAndTidyUpNow]

My sister has been with her boyfriend for about 4 years, they live separately, he has one DC from a previous marriage..

They want to buy their own place together but in order to do that she is going to sell hers, move in with him into his house and then once a suitable house comes on the market they will only have one house to sell rather than 2.
They agreed to sell hers because his DC is settled in the house and it wouldn't be fair to move him once to hers, then again to another place, plus his DC can walk to school from where he lives now and can't from my sisters place.

Anyway, we were talking about it on the weekend and she plans to move in but not to contribute to the mortgage by paying rent, the reason being is that all her disposable income will go straight into savings and be used to put into the new house. She doesn't want to contribute to the mortgage because she won't be named on it so if anything were to happen to her DP she would need to leave and ultimately she has reduced someone else's debt with no benefit to her. Similarly if they were to split up she will have reduced her DP's mortgage debt and be entitled to nothing.

Her and her DP have spoken about this and whilst he agrees that this is the most sensible thing to do he keeps giving her the occasional dig, i don't think hes serious, but a lot of serious things are said in jest! saying things like "well you could swan off after a year of free rent with your savings" - obviously she wouldn't do this, unless the relationship broke down but she's concerned that it will start to become an issue the longer she is there.

She has asked me if its the right thing to do and I am biased because she's my sister and because this happened to me - I moved in with an ex, paid rent which reduced his mortgage so that when we bought our next house we would have had more of a deposit, but the relationship broke down and he ended up with approximately 20k reduced off his mortgage just from my contribution and I walked away with nothing.

So has anyone been in this situation? What did you do?

She shouldn't sell her house. If renting it out isn't feasible then she should stay put. Instead they look for a new house to buy together then they sell both of their houses at roughly the same time.

Whether she were paying rent or not, she has still cashed in her biggest asset, which will then stop appreciating. For what? So she can wash his pants more easily from his house. Nope.

I think if he is making digs they need to sit down and talk about it or think again.

There are loads of options suggested ^^ and they should discuss all of them and do nothing until they are both happy.

I would have thought that if the "rent" - amount to be decided - was going into an account in joint names to be split 50:50 if the relationship ends - that would work for everyone.

Why don't they sell both houses and start afresh together? I know that's the end intention, but why spend a year at his first with this elephant in the room (that is clearly bothering him if his little digs are anything to go by, and he does have a point).

Strongly advise your sister against this. As others have says she is likely to lose out even if she pays nothing toward the rent. It’s a huge risk if properties go up. I know that’s less likely with Brexit but this is a massive unknown.

Dh and I have a few properties we rent out. It’s best to take advice from knowledgeable posters on here and rent it out. Yes, it may go down in price and yes she will pay tax on her income but as long as she uses a reputable letting agent, where the majority of tenants pay their rent and don’t trash houses, she will be paying off equity on her mortgage.

In most cases if you live in a house you do not own, you are paying for someone else’s mortgage. She doesn’t need to pay towards his mortgage per se but she does need to contribute something to the household. I would compromise and say she covers council tax and gas and electric etc instead. She can’t live there rent free.

I don’t think she should sell her house just yet either, maybe rent it out on a short term lease? They need to see how living together works out before committing to buying a house together imo.

Keeping both houses makes very little sense though if they are fully intending on living together, it's double the expenses. And surely the council tax and bills on her house would cancel out or go some way to cancelling out the potential increase in value.

OP also has specifically said they're selling one to make it easier to sell the other once they've found one to buy so the suggestion of selling both together goes against that.

OP also suggested that keeping the two properties is unmanageable, like one or both of them is struggling.

She should contribute to the cost of living in the house, and that includes the interest on the mortgage. Half the interest on the mortgage should be the starting point.
Like that, she doesn't feel she has "reduced her DP's mortgage debt and be(en) entitled to nothing", nor does he feel she is living rent free.
That should be the starting point. There are other considerations, that they could try to balance if they are sophisticated enough

• She is getting off the housing ladder, and would bear costs (stampd duty, conveyancing, etc) if the relationships breaks down and she has to buy a house solo later (on the other hands, she doesn't have to sell, she could rent, but hat also has costs hidden). House price can go up, but also down, so it's tricky to cost that (but possible if they want).

• There is likely a differential in interest between his mortgage and the saving accounts she would get, so it 's not optimum financially to do it the way they propose (but safer for her of course).

  All in all, I feel she could ask for a modest discount on her contribution to his mortgage interest, that take into accounts mostly the probability of a break up and the costs of her rebuying a house. But nothing? No way, that's complete CF and a sure way to breed resentment.

Spreadheet time!

It sounds like neither of them have any faith in this relationship.

I pay rent to my landlord, she pays her mortgage and i don't have anything to show for it but her mortgage gets paid off.

how is it different? she should pay something.

People are making the assumption that house prices only ever raise so while she might lose money if house prices increase but if they fall she has escaped the trap of negative equity.

There is a event happening in march 2019 that will most likely cause a nose dive in house prices so she will have her money protected and thus when the inevitable crash happens she will be in a much better position.

She needs to be contrubtioning more then simply 50% of the bills. If she does not want to pay rent i still think the fairest would be she pays all the bills and 50% of the food so they both are saving money (she still will be coming a head but not so much) He will be saving money as well so it is all fair.

She won't come out ahead though, as he will have another year of mortgage payments worth of equity from his house when he sells it!

His finances and what he does with the money are irrelevant, they don't have joint finances and she is not a co-owner of the house. She is buying accommodation from him at a fair rental rate.

If the fair amount of rent is £500 a month, she pays that, it's irrelevant whether his mortgage payment is £5000 a month or if it's zero because there is no mortgage. Whether he spends the £500 on mortgage interest, or increasing his equity, or saving it in a bank account, or investing it on the stock-market, or buying lottery tickets is irrelevant. The return or loss he makes as a result of any of those choices is irrelevant. What he does with his rental income after he receives it does not retrospectively alter the amount that it was appropriate to hand over in the first place.

By bills i mean water , electric gas, Tv licence and councial tax. Which is much much less then rent so she still is coming out head but he is also saving money so they are both saving money Rather then her simply taking advantage.

moved in with an ex, paid rent which reduced his mortgage so that when we bought our next house we would have had more of a deposit, but the relationship broke down and he ended up with approximately 20k reduced off his mortgage just from my contribution and I walked away with nothing

But you paid rent for however long it was. That is how rent works, you pay it to live there and when you leave you stop paying it, but you don't get any back. Of course you walked away with nothing.

Your sisters position is different, she doesn't need to pay rent anywhere, she has her own house and mortgage. She'd be mad to give it up to either live rent free with him or pay his mortgage instead of her own. It's an idea that leaves nobody with a good deal.
They need to sell together and then buy together.

She's the one taking all the risks under the scenario, frankly. She's not sponging; she's saving it for their joint downpayment.

The digs need to stop or they should continue living separately until they're ready to buy someplace together. That will take longer, but it's not reasonable for him to be making digs like that.

This idea sounds too complicated and is already breeding resentment. They should stay living separately until the right house comes on the market, then sell both houses. Timing may be tricky, but it's fairer in the end.
I echo a pp - spreadsheet time!

Has anyone ever actually sold 2 houses at the same time as buying another?

To me it sounds like a nightmare, what if her DP's house sold first, where would he go? He would have to uproot his DC temporarily, live out of boxes to have to move all over again once her house sells?
And then she would have to try and show people round with boxes of stuff everywhere or even vice versa if she sold hers first.

If the DC was not involved I would say it would probably be an idea but i don't think I can advise this because it sounds bonkers to me personally. Would all chains be prepared to wait whilst both houses sold? I think if their dream house became available and they lost it because one chain broke on one of the houses they would kick themselves.

Sell both and rent temporarily in the area

I was the first poster to respond saying put the savings into joint names. I obviously didn't mean the equity too. That really would have been madness.

Why don't they get married - then she sells her property and they move forward together from there?

If she was simply moving in permanently then obviously she should pay something. But as some others have said, at the moment she is taking all of the risk. If they split up then she will have wasted so much money on fees and moving costs which I doubt will be covered by what she has saved in not paying rent. Not to mention all the hassle of having to find somewhere else to live.

I moved in to my husband's flat and didn't pay towards the mortgage. He didn't want me to contribute as it was his flat, would always be his flat and me being there didn't affect the mortgage. I paid towards the bills I had increased like electricity, council tax, food etc. I saved left over wages in my own savings account. When we decided to get married and buy our own home I put all of my savings towards our home. He got the money eventually.

He does have issues - her.

She's living rent free and saving what she would have spent.

Firstly, don't have a joint account.

I can see it both ways. Why not split the difference and have a savings account for each of them.

Say your sister's mortgage was £600.00. She is benefitting from that amount by living with her partner. She can save £300.00 and give him £300.00 rent, so they are equally benefitting (as she would otherwise have to pay for somewhere to live).

She can have her £300.00 saved in an account and open a savings account for DP to pay his £300.00 into. If he can pay the mortgage now, there is no point giving it to him as he can manage without it, so can save it instead.

She's living rent free and saving what she would have spent.

That's one way of looking at it. Another is: she's spending a lot of money upfront which she potentially may never recover, and will have to find somewhere new to live if things don't work out.

He is not taking any risk. There is no financial difference to him with her living with him. As she is the one taking the risk it doesn't seem unreasonable that she gets some benefit out of it. He could split up with her a month after she moves in and she would have lost thousands.

Are people missing that if she lived in her own home she’s have had another use of equity in her own house. If she pays rent into his mortgage she won’t!
As a PP suggested perhaps paying half his mortgage interest or the equivalent of her mortgage interest would be fair so she’s still saving what would have been paid off in her house.

I also think the savings should be in joint names, (and I say this from a position of never having had a joint account) but only the savings she amasses while living rent-free. Obviously the money from the sale of her house should remain as her savings only.