Is this a fair way to split costs (mortgage related)?

[babycatcher411]

Person A and Person B want to move in together, but are considering the long and short term implications of doing so.

Person A (who has a child) owns a house, whilst Person B had been intending buying a house (has a deposit). The equity and savings are about equal (this may be relevant later? Not sure)

They have never lived together before so buying together at this point doesn’t seem sensible.

B initially states they are happy to pay half all the bills inc the mortgage.
B makes a comment in a different conversation stating legally (they believe/have been told) that after 3 years living together they would have entitlement over (some of) the property if they’ve paid in, regardless of it being in A’s name.

However A doesn’t think it is fair to B to pay half, as the mortgage is in their name and B would be essentially helping paying off their mortgage for them.
Equally they are concerned should the relationship breakdown that it would give B some entitlement over the house, they do not want this at this early stage of the relationship given they have a child.

A feels however that paying nothing would be unfair as B would be living rent free.

A suggests that B pays just half the interest, thus is paying a ‘cost’ of living in the house but isn’t paying off the equity. So A benefits no more from this than they do sharing the bills which are also a cost of living in the house. But B should also save an equal amount as to the balance of the mortgage that A is paying (hope this makes sense).

So let’s say the mortgage is £400, £100 is interest £300 is against the equity.
A would pay £350
B would pay £50 to the mortgage and save £300, totalling £350 also.

The theory being if they split up, neither is worse of, A has the equity in the house, B has their savings. But that if they live happily ever after together, as is hoped, when it comes to buying a house together, they can both contribute an equal amount towards to joint house.

Does this seem logical? And/or fair? And legally would this protect A’s house/equity should they sadly split up?
A does not want to screw over B, but also wants to protect the interest of their child and their home.

Sorry that was so long, trying to make sure I’ve made it entirely make sense and not drip feed anything

dnightmisssuki Wed 13-Nov-19 22:14:51
Christ. So complicated. Do any of you actually want to move in together?? It is cold - you’re right.

It's not cold, it's sensible. Typical knee jerk response.

Figure out how much rent in the area is for your house.
B pays a 1/3.
The you pay £200 a month for the child's expenses.
Then you split all extra bills half and half.
Tell them if they are not willing to share bills, your worried about moving in.

Have A&B considered marriage first? Isn't that the normal way to do things?

It would seriously stupid if A to marry someone before seeing how they got on living with her child

Very sensible to think of these things OP. Regards of the amount B pays, you need to have an agreement in writing that they have no beneficial interest in the property. Essentially, for financial purposes they are a lodger, it must be an agreement in writing and signed.

It is important that person B does not pay any maintenance costs toward the home (anything a landlord would normally pay for), and person A should ensure that they have a will, so that their child's interests are protected should the worst happen.

I don't think this is cold at all, in fact it sounds like you are both trying to protect each others interests. A few of my friends have entered into these agreements before cohabiting and have gone on to get married or buy a joint property with no problems or resentment.

Agree on paying a market rent.

Review the arrangement along with the relationship after 6 months.

If they want to stay together they should then get married and transfer the house into joint names, at the same time get a deed of trust to protect the equity which was brought into the marriage so in case of split the new spouse doesn't get any of it (suggest as a % of house value, otherwise new spouse will disproportionately benefit from increase in value of house). If new spouse wants to use some savings to pay off a chunk of the mortgage then the deed of trust should reflect their equity also. That way the equity and savings brought into the marriage are protected in event of divorce. This would also apply if they decided to buy a new house together rather than transfer ownership of the current house.

The point of the marriage is to protect the equity built up over the course of the relationship in case of divorce. Plus the other assets that would be part of the relationship.

Honestly? Like fuck would I as A move in with someone like B! I’d DEFINITELY not be marrying them. Frankly I’d be dumping!

“it sounds like you are both trying to protect each others interests” actually it sounds like A is wanting to be fair but wise and B is looking out for themselves!

IF A decides to go ahead and move in with B I’d advise getting sound legal advice, watertight contracts before B moves in and never marrying B.

This has disaster written all over it.

How long have they been together?

Apart from all the other considerations, di realise that the 400 pound monthly mortgage payment is very unlikely to be 100 interest and 300 equity unless it is at the end of its term. Usually mortgage payments have a scale in which for the first years you pay a hell of a lot more interest than you pay off equity so a 300 interest 100 equity split is more realistic. I mean, I still don’t know if your plan is legally sound, but if you are intent on making the split along the interest-equity lines than it helps to at least get your facts right.

The point of the marriage is to protect the equity built up over the course of the relationship in case of divorce

Is there a word missing here?

Person A and Person B clearly don’t have a trustful and long lasting relationship. I would suggest they part ways and enter speed dating to consider compatibility for the trades each considers as a good partner. ie Do you want to steal my equity? Do you consider my shower a selling point etc

I would talk to a solicitor about the 3 year rule. And maybe draw a contract in which B posts tent at below the market value and part of the bills, which would allow them to save money,, but not live for free. Do let's say if the local rent is 400. Per months, I'd put down 200 plus the share of bills.

@Walkingdeadfangirl it is not a 'normal' way of doing things, maybe a traditional one, but nothing weird or abnormal with unmarried people living together these days.

B gets a rental property and moves on the basis of being a lodger. B seems to know their rights too well. But at the same time they may be concerned they’ll never get on the property ladder. This way both parties get their own property. B may end up selling in a couple of years but equally you may find you aren’t compatible and not progress past this stage.

I think your plan is sensible. A keeps the house in the event of a split, but B will also have benefited by the increase in their deposit.

If things go well then you'll also have more savings to add to the joint pot.

People can't win on here- you just move someone in with you and your child: you're naive and too trusting. You sit down and plan things out: you're cold and heartless!

I like your plan, although I think B should cover all the interest. Furthermore, I'd start overpaying the mortgage by whatever B is paying so that if you did split, you wouldn't feel that they've walked away with a house deposit and you've gained nothing.

The three year rule is not a thing, assuming you are in England or Wales. There is no automatic common law entitlement to property after any fixed period. It is sometimes possible to claim against a property if you can demonstrate you made payment to it (mortgage or significant improvements).

I think it is very sensible to work this out now especially as there is a child involved. I would see a solicitor for a cohabitation agreement to be drawn up. A & B should have independent legal advice on the document so everyone is clear where they stand. Going through this process should also flush out if one partner is "out for themselves" more than the other.

It's really not difficult. I've done it myself in the past!!

Ring fence person A's deposit with a deed of trust. Both pay equally mortgage/bills etc then both benefit 50/50 from any increase in equity above and beyond the original deposit.

Later on person B can buy into the property by putting in the same deposit that person A did originally.

Simples. 😜

As others have said treat them like a lodger. This argument that they are paying off someone else's mortgage and don't have any rights is nuts. Tenants who rent or lodgers who rent don't 'earn' a right to a house and neither should B. They should still pay rent and bills.

can you not ask a solicitor if they can draw up something similar to a deed of trust when you move in to say A owns the house and agreed to pay all mortgage, B agrees to pay half of other living expenses but in event of splitting B has no claim on property. (B could independently have own savings incase relationship later fails) if A and B then marry the agreement would be worthless and not necessary as then it is martial assets including B savings

Can you have a solicitor draw up something similar to deed of trust stating that A owns house and agrees to pay mortgage. B agrees to pay half living expenses but if relationship fails has no claim on property. B could independently have savings incase relationship fails but in few years if marry no need for agreement.

I think A pays the mortgage and A and B split the bills and food.

talk to citizens advice about whether it’s actually a thing that if he lives with you and pays towards the mortgage then he can claim anything; people always say it but is it really true? And also set a deadline that if all is going well then he buys into your house in 2 years or he should buy his own place to rent out if he wants property.
I would just be paying 50:50 unless you’ve got a 5 bed and he could only afford a 2 bed (or similar comparison). You’ll continue paying your child’s costs like their clothing, childcare etc but if you’re going into a a serious relationship with someone when you have only one child then I wouldn’t be getting into the whole you paying more for the bedroom and more electricity your child uses.
DH and I have always paid equally into our homes even though they always include a bedroom for his DD because that’s part of being in a relationship with someone who has a child.

So how is it fair B has no rental costs if bills are just split?
Ask B how they see the bills split?
As with no rent, B gains, but if A lost their job, B would say they were not responsible for A and child .

So how is it fair B has no rental costs if bills are just split?

A has the asset of the house and B has the asset of cash (which they could invest in a house if they chose).

So should a landlord not look for tenants to pay rent @vivacian? Since the landlord has their house as an asset? Ridiculous!

Business relationships are transactional. In my experience, personal relationships are not. YMMV.