Mixed feelings about splitting the equity of my house

[Mx12345]

 

I don’t know if this is the right place for this. My boyfriend and I have been together 3 1/2 years. Two months prior to our first date I purchased my first home. This was a very big deal for me. I grew up extremely poor. As a child we were homeless at times. We lived with family at times. We lived in a housing project for many years. After college I lived in apartments, sometimes with roommates, sometimes on my own. Two years prior to buying my home I made a determined decision that I wanted to own a house. I had never lived in a house with a yard my entire life. I changed my lifestyle to save for my house. I moved from a trendy loft apartment downtown out to an apartment in the suburbs to save on rent. I stopped going out with friends. I cut down on spending. Then finally it happen, I had enough for a down payment and I purchased my first home, all on my own. It was a very big deal for me considering how I grew up. 

 

I purchased a home that was run down and had lots of issues but was in a hot downtown neighborhood. It took me an entire year but I completely remodeled my home and it’s gorgeous. With the remodel and the popularity of the neighborhood my house is now worth $90k more than what I paid. 

 

I knew my boyfriend was a keeper because he helped me with all the remodeling even very early in our relationship. We changed flooring, took down walls, painted, the works. I paid for all the materials (about $30k total) but he helped with the labor. 

 

After dating for two years my boyfriend moved in with me and we started splitting all household items 50/50. He pays half the mortgage, bills, groceries, and anything for the home. He also pays for half of the dogs care (two dogs that I adopted before him and I even met.) those are his babies and he splits all vet bills etc. we are a little family. 

 

We have now decided to sell our current home and buy another. The new home will be in both of our names and the down payment will be split 50/50. 

 

When we first decided to move, I told him that whatever equity we got from our current home, I would put towards the down payment of the new home and then whatever was left for the down payment we would split. I thought that was fair for all the work he did, plus he’s been paying half the mortgage for a year and a half. 

 

However that was when I I didn’t realize how much my home had risen in value. When the house appraised at what it did, I was stunned. The amount of equity I would get back would cover the entire cost of the down payment of the new house. 

 

I have very mixed feelings about this. I love this man. He is my forever partner. He is the best person I’ve ever known. And he truly did help me turn this dumpster of a house into a beautiful home. We spent every weekend remodeling. But I also put my life on hold for two years to save for this house and the remodel. I keep thinking about how I grew up and how poor we were and how I scrimped and saved for this house....all to give half the value away? It would mean he doesn’t have to put anything towards the down payment of the new home just split the mortgage. I’m so conflicted on what to do. Do I tell him I’m going back on what I said, to use the equity for the down payment? To be fair, we are both high earners, we both make 6 figures, he has enough in his savings for his part of the down payment. It just means he would be house poor for about a year while he replenishes his savings. I feel like I’m a terrible partner for even thinking about this. Any advice is appreciated. 

[trident_2020]

How much are we talking about here?

You'd be surprised at how much contractors charge nowadays.

Odds are the sweat equity your boyfriend put into the house along with his mortgage payments are more than the amount you're having an issue with and much of the increase in value is due to the work he did- in other words you would not have gotten nearly as much when you sold it if he hadn't improved it. Yes I know you did it together but you couldn't have done it without him.

 

Edited January 7, 2021 by trident_2020

[basil67]

A few more parts of the equation:

• Do you have an agreement that you both of you will continue being 50/50 no matter what happens in your life?   If either of you has time off for raising children, will the other be supporting the whole family?
• You said that he paid the mortgage - how did his mortgage payment compare to what he would have been paying in rent?
• He paid half of the vet bills which weren't his.  How much would this add up to?
• Most importantly, what would you have paid an independent contractor for the work he did?  

[Mx12345]

I will get roughly $120k after selling the house, paying off the existing mortgage, and closing costs. The down payment for the new home will be roughly $110k. So I’m essentially handing over $55k. 
 

I paid $45k towards the down payment of the current house. And another $28k in remodel materials and some labor that we didn’t have the skill set for. I lived on a super strict budget for almost two years to save for this. 
 

I will also say, I grew up knowing about construction. My father and uncle did construction their entire lives and I learned a lot. My boyfriend, amazing as he is, knew nothing about remodeling. He followed my lead on everything. When we tell strangers about remodeling the home, many make jokes about me handing him a hammer and him doing everything. That was not the case. I lived in the home as I remodeled it, moving room to room. I would work on it at night after work, by myself. I can’t diminish his role, I couldn’t have done it without him, but I also owned and worked on the home for two months prior to even meeting him. 
 

Other answers:

I truly don’t know how much it would have cost to hire out all the work. 
we don’t have an agreement to split 50/50 should someone lose their job, etc. we both have a six month emergency fund but beyond that I guess it’s something we need to discuss. 
By moving in with me he saved $600 per month on rent costs. 
after 3 1/2 years they are our dogs. He spoils them more than I do. I never asked him to split their costs. He feels they are his too, so he happily pays to take care of them. 
 

 

[ClearEyes-FullHeart]

3 hours ago, Mx12345 said:

The new home will be in both of our names and the down payment will be split 50/50. 

 

When we first decided to move, I told him that whatever equity we got from our current home, I would put towards the down payment of the new home and then whatever was left for the down payment we would split. I thought that was fair for all the work he did, plus he’s been paying half the mortgage for a year and a half. 

I think it’s a tricky situation and sounds like you have a good relationship and trying to switch things could sour things.

If the equity is 120k, and you both agreed to put down half the down payment (55k each) and you said you would split the remainder of equity isn’t that handing over 32.5k? Seems that the original agreement can be met and that neither of you thought the current home equity would cover the entire down payment. 

I read this fast and am tired so sorry if I misread something. 32.5k doesn’t seem too much to hand over. Perhaps it’s a nice compromise?

I would not want to hand over all my money that I worked so hard for but he also contributed a lot and seems like you both have a great relationship and teamwork. 

Good luck! 

Edited January 7, 2021 by ClearEyes-FullHeart

[Ruby Slippers]

It's not "our" home - it's yours. As long as you're not married, unless you have an iron-clad legal agreement for the new home purchase, you have no legal protection if things go sideways. You need to think about the worst case scenario and plan for that. In other words, if this falls apart in a year and he leaves, what will be a fair agreement for the down payment, and how would you handle a split financially? This is NOT an emotional decision. It's a financial decision. If I were you I'd do a detailed accounting of everything, factoring in fair payment for his remodeling labor as well as his savings in rent. And factoring in the market value increase during the time he was not contributing anything to the mortgage. This is a significant part of your long-term financial plan, so don't mess it up by being emotional about it. 

[Wiseman2]

Talk to an attorney. If you are both going to be on the deed of this next house, it should be 50/50 all the way.

Put the balance in investments or tax sheltered accounts.

It's disastrous to by a house on a lopsided basis. Whatever work he's done was to his own residence in the context of a relationship, therefore you don't have to reimburse that.

You're not married, so there's no set laws governing your situation. Neither of you are protected in a house co-owner situation. This is why you need an attorney. Use the funds for that.

[healing light]

Perhaps you can pay yourself back for the down payment of your initial house as well as the remodeling material (73k). Then apply the rest of the equity of the house toward the down payment and split the remainder if you want to keep your word without being resentful... I would definitely consult an attorney planning out the worst case scenario as Wiseman said and I agree with the calculation suggestions Ruby Slippers mentioned, as well, if you don't want to go that route. Either way, make sure you have a written agreement that you are comfortable with should things go south.

[d0nnivain]

First of all real estate is inflated now due to Covid.  It is contributing to the increase in value for the home you are selling.  Are you sure it is the right time to buy something new?

I'd be very leery buying a house with a SO if not married.  Whatever you said were just words.  You two need to see separate lawyers & hammer out a business agreement regarding this new house.  You need to think about what will happen if you split up.  Who buys who out, etc? This is a lot of money we're talking about & finances can ruin relationships.

He may have paid 1/2 the mortgage while living with you but that was probably less than what he would have paid in rent so in essence you were his landlord.  You don't owe him equity for that. 

You two need to have some difficult financial discussions before you move in any direction. 

[BaileyB]

I think you need an attorney and a cohabitation agreement.

Unfortunately, it should have been done years ago when you moved in together. It would have prevented this current situation...

I just built a home with a man and we are not married. I insisted on the lawyer, he was not sure he wanted the expense. The home is in your name, it was a preexisting asset. The profit from the sale of the home should be yours, do do with whatever you like... But, he has been living with you as a common law partner for a significant period of time - it’s possible that he could have some right to the home - a lawyer would clarify this for you. I realize that you plan a future with this man and you are trying to be fair, but you are not wrong to want to protect your investment and your financial best interest. 

Best wishes on your new home! 

Edited January 7, 2021 by BaileyB

[BaileyB]

7 hours ago, Wiseman2 said:

You're not married, so there's no set laws governing your situation.

Not necessarily, where I live there is a Homestead Act.

I’m not a lawyer, I do not profess to understand this... but as I understand it, there is an act that provides a non-owning spouse or a non-owning common-lawpartner, with specific rights with respect to homestead property. ... Briefly, the Act prohibits an individual from disposing of homestead property without the consent of their spouse or common-law partner who is not on title. It also gives the surviving spouse or common-law partner a life estate in the homestead property upon the death of the owner. 

A lawyer would be well worth the money for a consult. 

Edited January 7, 2021 by BaileyB

[Ruby Slippers]

I don't believe there's any kind of common law protection in the U.S. unless very stringent requirements are met to define the relationship in very clear ways as common law. Generally in the U.S. if you're not married with no legal agreement, a boyfriend or girlfriend has zero claim on any real estate just because they're living there. Generally they're considered a renter with tenant rights only - such as 30 days' notice required for eviction. 

If the OP chooses to reimburse him for labor or money paid toward the mortgage in some fashion, I think it would be very smart to have a formal agreement drafted outlining the terms. 

There was a case a while ago where a couple broke up, the woman owned the home, and the ex-bf was demanding a huge amount of money for remodeling work he had done in her house, though they had no agreement and he was demanding a lot more than she thought it was worth. I'd want to get square on the current house and new house before moving forward - legally and officially. 

[understand50]

This is one of the reasons to get married.  If you were, this would not be an issue. (I think)  If your BF is the one,  and you become one together, then everything goes into the pot.

Look, from what I know of law, you could marry, keep a separate account with the  money and maintain control of the asset, and it would remain your is a divorce.  (most placed, look you the laws where you live)  

I think your mind set is not one of wholly being together, so he may not be the one, or you are not ready for the next step in your relationship.

In any case, I wish you luck.

[deepthinking]

if this all went on with a friend-turned-roommate. just friends,  then all the answers would be obvious

You went without for two years.

"all to give half the value away?" please do the math, show him  the details - what are you afraid of? his anger?

Edited January 7, 2021 by deepthinking

[Ruby Slippers]

I get the sense that the OP is being overly "nice." It's something a lot of women do, to their own detriment. If she wants to reimburse/gift him something, it's her choice. Just get it all in writing so if things don't work out down the line, your butt is covered.

When I bought my house a couple years ago, I had a boyfriend who was excited to start investing in my house, but I put up a big stop sign. There was no way I was going to let a boyfriend get involved in the finances around my biggest asset without a solid legal agreement in place. I consulted my real estate guy, and he recommended putting a rental agreement in place, and definitely not letting him invest any money or labor into renovations without a concrete written agreement about the terms. 

[BaileyB]

2 hours ago, understand50 said:

This is one of the reasons to get married.  If you were, this would not be an issue. (I think)  If your BF is the one,  and you become one together, then everything goes into the pot.

Look, from what I know of law, you could marry, keep a separate account with the  money and maintain control of the asset, and it would remain your is a divorce.  (most placed, look you the laws where you live)  

I think your mind set is not one of wholly being together, so he may not be the one, or you are not ready for the next step in your relationship.

No, it is very possible to be committed to each other, and still maintain control of preexisting and separate assets. It happens all the time, as people build assets and they are forming relationships, possibly second marriages, when there are children involved...

The fact that you want to protect your assets OP is NOT in any way correlated with how much you love your partner or your commitment to the relationship.

Ask me how I know, my partner was previously married. He put everything into one pot, and when they divorced she took half the value of their home, half of his investments, half of his retirement, and half of the inheritance he received from his father - among other things. All well and good, but he was really wishing that he hadn’t put his inheritance money down on the mortgage because the money “co-mingled” and she was entitled to half. So, when we purchased out home... he has been very clear - everything is divided equally, preexisting assets and debts remain separate, with certain things going to me in the event of separation/death and other things going to his child. 

It’s really wonderful to have an idealized view of marriage,  merging of two lives and two bank accounts. But, do so at your own peril... There are some things that are too important not to discuss and plan (with a lawyer), and your financial stability is one of them...

Edited January 7, 2021 by BaileyB

[BaileyB]

9 minutes ago, Ruby Slippers said:

I get the sense that the OP is being overly "nice." It's something a lot of women do, to their own detriment.

I agree. And while I understand why she would want to do that, because she loves the guy and they are planning a wonderful future together... She also needs to protect herself. She has worked hard to buy her home and build her own net worth. It would be a real shame to lose that because you wanted to be nice and were overly generous with your partner. 

He has and will continue to benefit from this relationship. It doesn’t mean that you can’t or shouldn’t protect all that you have worked so hard to achieve. 

[BaileyB]

2 hours ago, Ruby Slippers said:

I don't believe there's any kind of common law protection in the U.S. unless very stringent requirements are met to define the relationship in very clear ways as common law. Generally in the U.S. if you're not married with no legal agreement, a boyfriend or girlfriend has zero claim on any real estate just because they're living there. Generally they're considered a renter with tenant rights only - such as 30 days' notice required for eviction. 

Interesting. It would seem there are more protections and different legislation in Canada - not surprising. 

Thanks for this Ruby. It reinforces the need to educate yourself OP and consult a lawyer. 

Edited January 7, 2021 by BaileyB

[Cheryl Grey]

I've been in your position. I had a boyfriend I was with for 7 years. I had a sum of money from before I met him and after some years together we decided to buy a house. I asked him to cooperate with me on a legally binding financial agreement (like a prenup for non married couples) that determined what happened to our respective shares in the house if our relationship ended. I put down a 40% deposit and the agreement said that if we sold the house under any circumstances I got back my deposit plus a proportionate 'profit' according to how much the house had gone up in value. Then we shared any balance 50/50 as we contributed equally to mortgage and improvements. Our relationship did end, and he was protected with a payment according to the agreement and my initial wealth was also protected. Other assets we agreed mutually.

Your home and the wealth from that is an investment. You need to think with your head not your heart. 

[Mx12345]

I want to thank everyone for their advice. I’ve thought about this for a few months and finally decided to talk it out with him today. 

 

He agrees that if he didn’t live with me he would have been spending almost $600 more per month on rent. He doesn’t think he should get any of that money back in equity. Since he moved in a year and a half ago he paid half towards a small roof repair and some electrical work. I am going to give him back his half. We both agree that he put man hours towards remodeling the home. Not as much as me, just weekends and not even for a full year but for 9 months. We have settled on a sum of $12k for this. We both think this is a fair amount. He loves the dogs and says they are his babies and he’s happy to pay for half of their care. We are going to draw up an agreement that states all of this and both sign it. This will all be prior to moving into the new home. When the current home sells, he acknowledges I owe him nothing. 

 

He agrees when I said it’s not fair for me to put forth all of the money for the down payment on the new house. We will split that 50/50 and continue to split all household bills and items. We both make a very good living and have a rough idea of how we want to share finances once we are married. For now though we will continue to keep separate accounts and split everything.  

 

I should have mentioned we are serious about marriage. We had an international trip planned this past spring that of course got cancelled. I suspected he was going to propose on the trip because we had looked at rings a few months prior. He has all but confirmed this was the case and now he’s just waiting so he can make it special again. 

 

Someone asked why we are looking to buy a new home. We have just outgrown this one. Yes its remodeled and downtown and you can walk to everything but it doesn’t have parking or a garage. It’s all street parking and sometimes you have to drive around the block to find a space. The yard is very tiny and we want more space for our dogs. The laundry is in the kitchen and we would like an actual laundry room. The list goes on. The house was perfect for just me, but we are thinking towards the future. 

 

I think the path we have talked about is good for both of us. He’s happy I voiced my concerns and isn’t resentful that I went back on my word. He fully acknowledges the sacrifices I made to purchase this house and doesn’t want me to feel slighted or cheated. 

 

I think we are good

[usa1ah]

One thing you can do is subtract your first down payment and cost of materials. Then divide what is left. 

[BaileyB]

Sounds like you have a really good guy there... I would seal the deal.  Good luck! 

[Wiseman2]

5 hours ago, Mx12345 said:

. 

 

He agrees when I said it’s not fair for me to put forth all of the money for the down payment on the new house. We will split that 50/50 and continue to split all household bills and items. and isn’t resentful that I went back on my word. He fully acknowledges the sacrifices I made to purchase this house and doesn’t want me to feel slighted or cheated. 

He's a keeper 👍

Edited January 8, 2021 by Wiseman2

[LivingWaterPlease]

I really enjoyed reading about your bf's attitudes about all things, y'all's dogs, helping with renovations, agreement about your financial investment, etc. So nice to read about a couple where things are going great! Wishing the two of you continued happiness (and continued wisdom and good will!).

[HadMeOverABarrel]

Sorry for not answering your question about the equity right now, but I couldn't pass by your post without congratulating you.  Overcoming poverty, first-time home buyer without family examples, and six figure earner...you've made big strides!  That is tremendous discipline and determination and ingenuity! Well done! Don't forget to take a moment to celebrate yourself and your accomplishments once in a while.