Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Question from Saige in SC: Hi Brian, we got married very young. I was 18 and my husband was 20. We moved in with his parents so that he could finish college. Now it’s five years later and we are still living with my in-laws. I’ve had a job all along and my husband got a good-paying job three years ago. Over the years, we have taken on more and more of the household expenses. Shortly after I got a job, we started paying for most of the groceries and utilities. Since my husband got a job, we have also paid the annual HOA fees and insurance for the past two years. We also bought a nice new refrigerator last year.
Last week, my mother-in-law said that it’s time that we start paying half of the mortgage. They also bought a new car for cash a few months ago. I told my husband that we are already paying enough, and I don’t want to pay half of the mortgage. We are financially stable and could rent a decent place for a little more than what we are now paying to live with his parents. However, we are very comfortable here and have talked about staying to take care of his parents after they retire. They were both close to 40 years old when my husband was born, and he is an only child.
With the mortgage issue on the table, I’m thinking that it is time for my husband and me to grow and decide what we are going to do. I suggested to my husband that if we start paying half the mortgage that our names must be added to the title. He says that because he is an only child, that we are going to get the house one day anyway and that we shouldn’t make that demand. What do you think?
Answer: Hello Saige. That’s a tough question because you are intimately connected to your in-laws. What I suggest is that you consider it from a financial perspective that I can share and find a way to combine that with the relationship that you have with your in-laws.
Where I suggest you begin is by creating a detailed spreadsheet of expenses that you and your husband have paid over the past five years and a counter spreadsheet showing what your in-laws have paid towards the mortgage. In the end, I’m going to suggest that you consider asking them to add you to the house title using a “tenancy-in-common” (TIC) contract that explicitly says what you each pay and what rights each of you have. For that reason, the spreadsheet for your expenses might go back five years, but your in-laws' mortgage payments should go back to when the house was purchased.
Total both spreadsheets up to compare what you have paid in expenses to what they have paid towards the mortgage. Things like their new car probably don’t count because that is a personal possession. On the other hand, the new refrigerator does count because that is shared. You can use the totals from the spreadsheets to create a ratio showing how much each of you has paid towards the household costs for the past five years. I don’t know what that ratio is going to be, but lets’ say it shows you’ve paid 20% of the total costs for the past five years compared to your in-laws paying 80% of the total mortgage.
Your in-laws get to count the entire time they have paid towards the mortgage because you are trying to determine the percentage of ownership that will be applied towards the TIC. You only get to apply what you have paid towards household expenses for the past five years because you didn’t pay anything towards the mortgage or expenses before that. Applying all the household expenses is generous because you would have paid at least half of that for yourselves if you didn’t live there.
That ratio is a beginning point. Now you can take both spreadsheets and continue adding half of the mortgage to each one until the mortgage will be paid off. This will create a new ratio. Again, I don’t know what that ratio will be but let’s say that it is 30% for you and 70% for your in-laws. You now have what should be a relatively fair division of ownership that could be applied to a TIC contract going forward.
But you may need to make adjustments to what you calculate going forward. As I described it, the 30% and 70% share going forward will be fine if both you and your in-laws equally split the mortgage payment and the other household expenses. If you are going to continue paying all the household expenses plus half of the mortgage, it will shift more of the ownership to you. Maybe 40% for you and 60% for your in-laws by the time the mortgage is paid off. But you must figure these numbers out for yourselves.
I suggest that the first thing you do is all sit down to talk about this as mature adults to reach an agreement. At the end of the conversation, you might suggest to them that you put together a draft of the spreadsheets. Your in-laws would then have an opportunity to make changes based on their perspective. In the end, you need to sit down again to decide on a final version.
Keep an open mind. There could be other tangible factors to consider. These might include who is doing most of the cooking, cleaning, and other chores. You all must try to work this out like adults. You could try to turn the entire situation over to an attorney to work out an ownership ratio. But working as a family, you know what the important details are, as long as you can agree on them.
Saige, once you agree on the ownership ratio, you want to turn it over to a real estate attorney to draw up a tenancy-in-common contract. That’s the solution that I suggest. But this is family. Your husband suggested that you will inherit the house one day. A possible solution for this could be having the house placed in an irrevocable trust with you and your husband as beneficiaries. Or an attorney may have other suggestions. I hate to bring up the nasty word “divorce.” But for your sake, you might want to make this part of your conversation with an attorney before agreeing to anything.
Certainly, readers have something to add. Please comment.
Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].