Blending a House Financially...Need Advice and Ideas to Consider

[Dahlia]

Hello everyone,

I lurk here regularly, and now I come to you with a complicated situation that I have never seen addressed in the forums or blogs.

I am seeking suggestions and things to consider concerning financially blending a house. I am 40 yrs old, Fiancé is 45 years old. I earn about $60k per year, Fiancé earns about $100k per year.

Backstory: Over 12 years ago, I received an inheritance from my deceased parents. I used the money to buy into real estate (down payments). I own one rental property outright. I have paid almost 80% off on another rental property. My own single family house (SFH) is 60% paid off. My SFH is the problem.

I am engaged to Fiancé, and it is a 2^nd marriage for both of us. He has an adult daughter, and I have a 6 yr old daughter. We do not plan to have any children together. He has been living in my home for 3 years and wants to ‘buy’ into the home so we are co-owners. He has been splitting the bills and mortgage with me since he moved in.

For easy numbers sake, my house is worth $600k. I have a $200k mortgage on it. The mortgage is $950 per month. This home is in the middle of a city, in a very desirable area. It has appreciated nearly $100k since Fiancé moved in 3 yrs ago.

I love this home. I renovated it extensively when I bought it 10 years ago. When she was born, I brought my daughter home from the hospital to this home. I have 2 dogs buried in the backyard. I never want to sell this home.

Fiancé also loves this home. He wants to stay in it with me. He has offered to pay off the mortgage entirely if I give him 40% ownership. He does not like splitting the monthly mortgage and a large portion goes to interest. He does not like splitting the mortgage for an appreciating asset that he does not own. He says we can both be mortgage free and enjoy the lifestyle that comes when you are financially independent (early retirement, travel, ect.).

I am hesitant because:

If we break up, I’ll have to buy him out of the house? So I’ll have to take out a new mortgage for 40% of the value? This is a fast appreciating home and I worry that in ten years, the house might be valued at close to a million dollars and I’ll need to give him $400k to buy him out. Which is much higher than my current $200k mortgage.

If I die and fiancé is alive, my 60% ownership goes to my ex-husband to manage until my daughter is an adult. So my Fiancé and ex-husband will co-own a house together? Will my fiancé then owe rent to ex-husband for 60% of the going rental rate…for the rest of his life?

When I & Fiancé both die- our kids will co-inherit the house. His daughter has no ties and will want to liquidate her 40%. Which means that my daughter (who may want to keep the house she grew up in) will have to take out a mortgage to buy out the other. And the mortgage will be substantially more than my current mortgage is today.

My friends all tell me I am over thinking this situation. They tell me to let Fiancé buy into the house and live out the rest of my life mortgage free. They tell me that if he co-owns the house, he’ll pay nearly half of the repairs too. Which will be substantial when it needs a new roof, or siding, or A/C. And if he does not buy into the house, then those expenses are all on me, which is a bit of a burden.

What do other people do?

Another option is for me to sell a rental property, and use that money to pay off my mortgage myself. Then I’ll own the house and we will both be mortgage free. I'm a little unhappy to do this because both properties cash flow several hundred dollars each month. And they are also appreciating in the city. They were kind of earmarked as my retirement safety-net. But I'll do it if it is the cleanest solution.

But is it fair to expect to then split the ongoing expenses of repairs (roof, siding, A/C, property taxes, ect.) with Fiancé?

Thanks in advance for any insight!

[cypher1]

My initial thoughts are I wouldn't recommend changing anything until you're legally married. Otherwise I don't think he should have any say in the matter since it's all your assets, and he's basically renting from you. Which to me, doesn't sound like a bad deal for you. Sure, there's trade offs, when it comes to repairs and updating on you. Add to the fact you have rental property generating additional income, why sell? Unless it's becomes too much of a hassle to maintain. Take what I say with a grain of salt. I know others on this forum are more educated on this subject.

[Jluke]

You may need a lawyer.

you may want to familiarize yourself with state laws regarding pre-marital vs marital property as well as whether these items are distributed equally or equitably if divorce.

no transactions should occur until you both say “I do.”

[Dahlia]

Thank you for the insight.

I thought a lawyer would be helpful, until someone pointed out to me that lawyers charge by the hour. They especially make their money sitting with you while you argue with your Fiancé about the best option to pursue. Lawyers do things. Don't pay them to listen to problems and act as a therapist. So I'd like to go into the lawyer office with a proposed plan, and ask them to contribute anything we had not considered.

This issue is delaying the marriage. We have been engaged over a year. I refuse to plan a wedding until I know what we are doing with this asset. Saying "I do" and then trying to find a solution seems like I am severely limiting my options. I consider this kind of a pre-nuptial type of activity.

Originally, the topic came about in a heated way, and it has since died down into a 'I don't want to talk about it and start a fight' type of way.

I am coming out ahead right now. I own the house and he contributes a bit to the mortgage paydown every month. Which is clouding my judgement on what is fair. I don't want to "come out ahead" of him. I want a partnership where we both benefit.

And delaying the resolution has had its own side effects:

The house appreciated nearly $100k since he moved in. So every year that we delay this decision has him contributing monthly to my asset appreciation.

And there was a rat last year that caused $4k in water damage that we split the cost to repair.

And now the backyard is getting a major facelift with pavers, fencing, and a custom built shed to the tune of $14k...which we are splitting too. He is splitting these expenses because he believes that its only a matter of time that he'll be co-owner of the house. I am feeling guilty taking his money because I'm not sure if he will co-own the house. ...But if he lives here the rest of his life, he gets to enjoy these upgrades...so why shouldn't he pay half?

And I pay about $4k in property taxes per year...myself. And I have to pay them again in January, a payment he is not helping with because we have not found a good plan regarding this house. So I've paid about $12k in property taxes since he has moved in.

So I feel that we need to find a resolution.

[disneysteve]

You may need a lawyer.

you may want to familiarize yourself with state laws regarding pre-marital vs marital property as well as whether these items are distributed equally or equitably if divorce.

no transactions should occur until you both say “I do.”

I agree 100% with this. Second marriages need a pro when there are substantial financial assets involved and even more so when there are kids involved too. Everyone needs to make sure that their interests are protected in the event of a future separation.

[rennigade]

You're not married, keep the house in your name. Also, may want to consider a prenup since you are bringing considerable assets into the marriage.

[disneysteve]

if he does not buy into the house, then those expenses are all on me, which is a bit of a burden.

You'd be no worse off in that situation than you would have been had you never met him. You already own the house so those expenses would have been yours anyway. And you'd still be better off if he is paying "rent" or covering other household costs once you're married.

[rennigade]

Thank you for the insight Cypher.

This issue is delaying the marriage. We have been engaged over a year. I refuse to plan a wedding until I know what we are doing with this asset.

Originally, the topic came about in a heated way, and it has since died down into a 'I don't want to talk about it and start a fight' type of way.

I am coming out ahead right now. I own the house and he contributes a bit to the mortgage paydown every month. Which is clouding my judgement on what is fair. I don't want to "come out ahead" of him. I want a partnership where we both benefit.

And delaying the resolution has had its own side effects:

The house appreciated nearly $100k since he moved in. So every year that we delay this decision has him contributing monthly to my asset appreciation.

And there was a rat last year that caused $4k in water damage that we split the cost to repair.

And now the backyard is getting a major facelift with pavers, fencing, and a custom built shed to the tune of $14k...which we are splitting too. He is splitting these expenses because he believes that its only a matter of time that he'll be co-owner of the house. I am feeling guilty taking his money because I'm not sure if he will co-own the house. ...But if he lives here the rest of his life, he gets to enjoy these upgrades...so why shouldn't he pay half?

So I feel that we need to find a resolution.

He is paying you, the owner, rent. He's paying to stay there, the same way he would have to pay if he stayed somewhere else.

If he is only splitting costs because he thinks he'll have ownership in your home, thats a massive red flag, imo. Tread lightly.

Go see a lawyer and protect yourself, like other said. Start now so you can stop delaying things and get to a resolution.

[Dahlia]

Question for Rennigade:
If he is only splitting costs because he thinks he'll have ownership in your home, thats a massive red flag, imo. Tread lightly. ...but isn't that a normal reaction to expect of him? Why should he be expected to split the cost of repairs and upgrades for a house he 'rents?' see how this is murky and confusing? I've come full circle many times trying to figure this out.

And yes, if I was living alone, I would have maintenance repairs to shoulder myself. Which I can cover with a lot of saving and advance preparation. But the reality is -he lives here too. So why should I pay for all this maintenance when he potentially will enjoy them for the life of the repair? If a roof lasts 15 years, we might be looking at 2 more roof replacements before we die. And if he is only splitting the bills, then he is not paying me extra to stash away for these repairs. My REAL rental properties pay beyond the mortgage, because I theoretically stash extra every month to pay for eventual repairs.

And to make sure no one gets the wrong idea of his intentions- he's not 'out to fleece me' or anything. For the past 3 years he has been living in my house - he has rented out his own house and uses every last cent he has to pay down his mortgage. His mortgage will be paid off in the next few months, which is why he wants to turn his attention to my mortgage. He wants to put his excess money into an investment, and why not put it into a house that will relieve me of my mortgage? That is his line of thinking.

So theoretically, I could tell him to put his money into a ROTH or some other investment....but then how do we fairly come to a solution about the upcoming maintenance that we both will enjoy.

[Dahlia]

Also, I'm not trying to argue with anyone's advice. I'm just pointing out different perspectives. My friends think I have over-thought this problem and I'm adding in factors that don't exist (like a breakup, or death). They tell me, "you'll be dead! Who cares what happens next!?" Well, I am in this because my parents died and I got the outcome from their lifetime of decisions bundled into an inheritance. So I'm trying to be thoughtful for my daughter as well. So my friends are no help. I'm now turning to strangers on the internet to throw out ideas, possible plans, and impartial advice.

[Like2Plan]

Dahlia,
I get the sense that this is not something you want to do plain and simple. Shouldn't your fiance respect that?


So theoretically, I could tell him to put his money into a ROTH or some other investment....but then how do we fairly come to a solution about the upcoming maintenance that we both will enjoy.

Charge him more rent to cover maintenance. I think the Roth suggestion is brilliant.

[Dahlia]

You are correct that I am really scared to mingle my house. I'm also currently benefitting from the current setup. It's a small amount now, but translates into a lot of money long term.

Maybe I'm wondering if its fair to have the current setup? Is it fair for him to split the mortgage when he does not gain anything long term? ...I think YES- it is acceptable for him to split the cost of the roof over his head. He thinks NO- because that payment is made up of unnecessary interest that could be removed if he was allowed to take it over and pay it off in thousands of dollars monthly chunks. He also pointed out that I benefit from the mortgage interest write off, and he does not. Petty point, but it helps to show that this is a lopsided arrangement.


And if I sell a property to own my house mortgage free- is it fair for him to pay into the cost of repairs, property taxes and maintenance? He will live in the house long enough to see several repairs and several updates. So shouldn't he contribute 50%? But if he has no ownership then common advice is that he should not put his money into an asset he does not own.

But jeeze- if I pay off the house completely, that is a $500k investment/Risk that I made tying up so much money. And he lives in it, able to direct his money into a ROTH (or a different property that he solely buys). So my money is tied up in the roof over his head, and his money goes to his own investment that I don't benefit. So I'm thinking it would be fair to expect him to split the costs of repairs and maintenance and upgrades. But is that a clear cut argument that he'll also follow? Or is this my own reasoning that is justifying a selfish action?

[rennigade]

I think you're overthinking this. If you feel like he's getting shafted, then either start paying for all renovations, or stop renovating. He should still be splitting the bills when it comes to utilities since he is using utilities. He should also continue to pay you rent.

Im sticking to my guns and still think you should consult a lawyer. You have considerable assets you're bringing into the marriage. You really should protect those. Thats all I got and will stop throwing my opinion around since I do not want to cloud your judgement more than I already have.

edit: I saw you posted right after I posted this. It seems like no matter what you do, you're either going to regret it, or he is going to be mad. Here's probably your best option. Sell everything before marriage, then purchase a house together. Still get a prenup of all your assets before marriage. Then you guys can go 50/50 on a new home, repairs, bills, maintenance, insurance, property tax, etc etc. Everyone wins. Other than that, I can see ugly storms on the horizon. Ugh...there I go again with more thoughts. Ok, im tapping out. Good luck to you.

[Jluke]

Have him pay the utilities instead of the mortgage. Those are “consumable” items.

BUT I still say get a lawyer. The comment about a lawyer listening to couples quibble might be more for divorce lawyers.

I would list out her assets, his assets and OUR assets and give to the lawyer prior to a meeting. Or follow the lawyer instructions.

[cypher1]

And yes, if I was living alone, I would have maintenance repairs to shoulder myself. Which I can cover with a lot of saving and advance preparation. But the reality is -he lives here too. So why should I pay for all this maintenance when he potentially will enjoy them for the life of the repair? If a roof lasts 15 years, we might be looking at 2 more roof replacements before we die. And if he is only splitting the bills, then he is not paying me extra to stash away for these repairs. My REAL rental properties pay beyond the mortgage, because I theoretically stash extra every month to pay for eventual repairs.

Fiance or roommate, he should not have to pay more or feel obligated to contribute anything out side of rent or the agreed expenses. As you said before, it's your name on the house, not his. The burden of expenses or equity increase will be on you...until your legal status changes. Now if he wants to contribute more on his own, that's on him.

To an extent I do see where he is coming from, and wanting to have some stake in the investment since you're engaged. But I do agree you should lawyer up to really outline your options. If you've already been married before, this shouldn't be taken lightly. So regardless of what your friends say, you have every right to be concerned. This is a very good test or example of what to expect within your marriage, and how you both handle your financial disagreements moving forward. Best of luck!