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My boyfriend and I have a strong relationship and we’ve been discussing moving in together. The catch is, he already owns a house. We make similar incomes and feel comfortable splitting expenses evenly. I would want to contribute to housing costs, but it seems a bit unfair to split a mortgage payment down the middle when it’s going toward the house he ultimately owns.
His house is not in a location where I would choose to rent otherwise, and it doubles my commute time, but I’m still happy to move there as a next step in the relationship. Of course, if we end up life partners, the question of contributing to his mortgage would be a wash, but I also want to be realistic. If the relationship ended, should I be okay with walking away having paid off a potentially large portion of his mortgage? Is there a typical practice you know of in these situations?
I love your question because it so neatly distills the problems that every couple has with money: How should they split expenses that benefit one person disproportionately?
Even if your boyfriend is the most welcoming, “mi casa es su casa” kind of guy, you’re smart to exercise caution. Under law, his home belongs to him, and in many states, it’s his and his alone until your name goes on the deed papers — even if you get married, because it qualifies as a premarital asset. In my opinion, your hesitation to fund this mortgage isn’t just realistic; it’s better for your relationship’s future (not to mention your financial one), because you and your boyfriend will have to talk this through. By teasing out the finer points of what you’re willing to pay for, who owns what, and the differences between your financial positions, you’ll set yourselves up for a much smoother ride if and when your finances start to blend.
Unfortunately, there’s no numerical formula for your situation, despite the fact that it’s becoming the norm. However, there is a relatively simple way to break it down, in concept: Treat housing expenses as though your boyfriend is your landlord. “Approaching this arrangement from a landlord/tenant perspective may seem cold, but it is objective, straightforward, and meets the interests of both parties,” says Sarah Asebedo, the president of the Financial Therapy Association and a professor at Texas Tech University. “The bottom line is that if your boyfriend owns the house, he bears all of the associated risks. These include a decline in the home’s market value, any expenses associated with its future sale, and necessary maintenance and upkeep.” If a dog-walker happens to slip and fall in the icy driveway, guess who’s liable? Not you. (You also shouldn’t be the one who pays for a snowplow service, either.)
In return for shouldering these risks and expenses, your boyfriend will build equity and perhaps one day sell the house for more than what he bought it. But for now, that doesn’t concern you. “It’s not fair to expect to receive these returns if you are not bearing any of the risk,” explains Asebedo. “To justify asking for part of those returns, then you would need to become a joint owner and borrower of the property, but given your relationship status, it sounds like you aren’t ready for this.” And then there’s the fact that you wouldn’t even want this house anyway. “If you wouldn’t buy it on your own, it makes no sense to ‘buy’ it now,” she adds. (Another option would be for you to become a “tenant-in-common,” which would give you a percentage stake in the property, but again, that seems like more trouble than you want.)
So, now for the trickier part: How do you decide how much to pay him for your “rent”? It’s reasonable to think that a 50-50 split of the mortgage payment would be fair, but a closer look in this situation reveals it isn’t. “As an owner, your boyfriend should cover the costs associated with ownership — property improvements, repairs, insurance — like any landlord would,” says Asebedo. To determine your monthly payments, check out current rental rates for similar properties nearby. ”Either pay half the mortgage or a fair rental rate for a similar property, whichever is less,” she suggests. Then, of course, you can divide the rest of your living expenses — utilities, groceries, etc. — the same way you would if you were both renting together. (Asebedo also recommends getting your own rental insurance policy to cover your personal property.)
In other words, don’t overthink it. “As a renter, you’re already paying part of the mortgage for whoever owns your home, so in that sense, nothing will change,” says Clinton Gudmunson, a professor of family studies at Iowa State University. “You’re still paying for a place to live, and that’s worth any person’s money. This is just a slight shift in mind-set.”
That being said, it’s important to consider the emotional component of this process. If you’re already feeling lukewarm about your boyfriend’s home, then emphasizing his ownership of it and your lack thereof doesn’t exactly inspire visions of blissful cohabitation. You don’t think of your landlord as someone you live with; you think of him (or her) as someone who finally fixes your drains after you email and call them repeatedly. And that’s why you’ll need to have an open mind, a sense of humor, and a willingness to talk whenever money gets prickly. “Having honest conversations with him about the financial arrangement is essential,” says Asebedo. “Being careful to listen and understand the perspective of the other person is key.” Obviously, there will be complications — maybe you want to get the living room repainted, or hate his ugly entertainment console — and that’s where you’ll have to communicate. Be aware that research has shown that spouses who cohabit before marriage do not demonstrate more “positive problem-solving” than couples who don’t — which may come as a surprise, but goes to show that regardless of your relationship status, sharing space calls for a strong commitment to long-term compromise.