Philadelphia Weekly

Share this Story:

Check title, laws when dividing proceeds

Ilyce Glink
Inman News

Q: I have been in a home with a partner for a few years. I have paid all of the mortgage payments, all of the property taxes, and all water and sewer bills. I also put an 18-by-25-foot addition onto this home with a new roof, all new windows and a stamped concrete driveway.

My partner has debt of $175,000. This amount does not include the first mortgage on the home. I am not a co-signer for her debts and I didn't get anything out of all the stuff she charged. She is now claiming that we should use the proceeds from the sale of the house to pay off her debt and then split what is left.

Since I don't owe any of these debts, and since I have paid for this property on my own, do I have to do this? Please advise.

A: The real question you need to focus on is what is your financial arrangement with this woman? Is she on the title to the property? If so, is she supposed to share in the expenses of the property? Are these arrangements written down anywhere?

If she is on the title to the property and if she is supposed to share in the expenses as well as the profits, then you should agree to her request to share in the profits -- once her unpaid share of the expenses has been deducted.

So, tally up what you have spent for the mortgage, maintenance, upkeep and renovation of the property and divide that number in two. Present your partner with a copy of the bill. Once you sell the property, deduct her share from the net proceeds and split whatever remains. Fair is fair.

If, however, her name is not on title or the mortgage, you may still have an obligation to share the revenue with your partner.

Those states that recognize common-law marriages and that recognize same-sex marriages would allow each person in the relationship to claim ownership of the property. In your case, the home could be considered owned by both of you -- and upon the sale of the home, both of you would share in the expenses of the home, and any profit from its sale.

While this issue may not apply to you and may not apply to the state you are in, the issue will become more prevalent in states where common-law marriages are recognized. This issue will also become more prevalent in states that are starting to recognize marriages (whether formal or common law) between same-sex couples.

Please talk to a real estate attorney to make sure you're not missing anything. And, be glad that you are not a co-signer to her debts.

Q: My fiancé and I want to buy a condo for $160,000. I am 20 and he is 21. We both have credit scores that are about 700. I work full time at a bank. He is a full-time student and works part time. He will be graduating in one year and we are getting married this summer. Do you think that we will be able to get a mortgage with a $7,500 down payment?

A: Unfortunately, the market has changed. Unless your bank is willing to give you a loan based on your verifiable income, credit history and score, you may not be able to qualify for the mortgage.

For the most part, your best loan option might be an FHA loan because of the size of down payment you want to put into the purchase. As for most other loan products, you may find it difficult to secure a low-down-payment loan.

FHA loans require just 3.5 percent in cash for a down payment. (Conventional lenders will require a higher down payment and expect to put down even more if you're buying a condominium). On a $160,000 home purchase, you'd have to put down at least $5,600, but you'd have to be able to afford the payments. On a 30-year fixed-rate mortgage at 5 percent, your monthly payments would be about $840 plus real estate taxes and insurance.

You also need to keep in mind that recent loan guidelines may make obtaining a loan for the purchase of a condominium more expensive. In some cases, interest rates on loans for condominiums can be up to half a percent higher than non-condominium loans. And, you may need to put down a higher cash down payment.

Your mortgage, taxes and insurance cannot exceed 36 percent of your gross monthly income. So if you assume your real estate taxes are $3,600, or $300 per month, and your homeowners insurance is $1,800, or $150 per month, your total monthly expenses would be about $1,290.

If you're buying a condominium, you have to factor condo association (or homeowners' association) fees into the mix. Those, along with your mortgage, real estate taxes and homeowners' insurance premiums, have to fall below 36 percent of your gross monthly income with very few exceptions.