My husband bought a new house with his brother for $ 350,000 in 2009, before our wedding. They both contributed to the down payment and paid off the mortgage. It was a difficult subject between us, but luckily I have a great job and great credit. We saved some money for a down payment, and I qualified on my own to finance our own house separately from his brother.
He left home with his brother in 2012 and his brother has taken care of all household finances since. My brother-in-law just refinanced the house and took the title and deed away from my husband. Among themselves, they discussed with my brother-in-law to reimburse my husband for the $ 30,000 he paid for the deposit.
« “My brother-in-law just refinanced the house and took the title and deed away from my husband. “«
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I asked my husband why he would only be refunded the down payment amount and not the increase in the value of the house. It is currently valued at over $ 700,000. Wouldn’t it be more appropriate for my brother-in-law to reimburse double the down payment, given that the value of the house has doubled?
My husband said they discussed it, and because he moved in 2012 and his brother has paid for everything since then, his brother-in-law is getting all this capital increase. I absolutely have the impression that my poor husband has been bamboozled by his greedy brother! Should I push this or just stay out of that and leave it between them?
I am the one who manages our finances. We don’t have any debt other than our mortgage, so we don’t desperately need the money.
Wife and sister-in-law
Dear sister-in-law,
All eventualities must be formally agreed before co-buy a house with a family member or friend. For starters, if you buy the property as a “roommate,” you each own 50%, and if one of you dies, you can’t leave your other half to a third party. If you are “tenants in common”, you can decide on your respective shares and leave your own share to a third party.
Key questions for any cohabitation agreement: What if one person moves and the other takes over the mortgage and utilities? What if a person moves and still shares the mortgage, but someone pays utilities? How will you divide your shares in the house if you haven’t made an equal down payment? Will one person be able to redeem the other?
If your husband moved in 2012 and did not continue to pay the mortgage and his name was on the deed, he was still entitled to half of the proceeds from the sale of the house, even if it did not appear. just to your husband. However, they decided to take another route, and your husband agreed to repay the deposit after living in the home for three years.
Other options
Your husband could have (i) insisted on 50% of any appreciation between 2009 and 2012, assuming there was equity in the house at that time. At the very least, they could have (ii) divided the home equity 50/50 – minus half of mortgage payments and utilities and taxes from 2009 to 2012. Or (iii) it could have taken 8, 5% of $ 700,000 (as he invested 8.5% of the original sale price).
Alternatively, he could have (iv) calculated his down payment and home equity from 2009 to 2012 as a percentage of the original house price and applied it to the final sale price. A member of the Moneyist Facebook group gives this scenario: $ 30,000 plus, say, $ 8,000 in mortgage payments for those three years. That’s 10.8% of $ 350,000 – or 10.8% of $ 700,000, which would be about $ 76,000.
Or (v) your husband could have simply taken the dollar amount of the down payment and equity from 2009 to 2012 with interest for the intervening years, since your husband’s investment earned no interest in the during this period. However, given that they’ve already come to an amicable deal, and provided your husband is okay with moving on, it seems too late to renegotiate this now.
Their deal is already done. Your husband absolutely needs to get his deposit back. Could he have forced the sale of the house through a sharing action? Yes, if it got acrimonious. But since he moved in 2012 and stopped paying the mortgage, their arrangement seemed fair to the brokers and allowed them to go their separate ways without any lingering ill will.
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