Equity Entitlement

[watchingno1]

My partner and I bought a new house six months ago. Due to his bad credit, the mortgage was put solely in my name, and thus the title to the house. Our out-of-pocket expenses were $6,600, of which I paid $6,000 and he paid $600. We have now separated and my partner wants to have the house evaluated to asses if there is in equity, and if there is, he was 50%. I feel that since he only put up 10% of the costs required to get the house, then he should only receive 10% of any equity. Does he have a case?

 

[lwpat]

Why does your partner feel that he/she has any legal standing? The mortgage and title are in your name so it is legally yours and the value of the house has probably decreased.

 

[watchingno1]

We had agreed to buy the house together but found that we couldn't get a joint mortgage because of his bad credit, so the mortgage had to be put in just my name. My partner feels that that is just a technicality. He also feels that since he has been paying half the mortgage for the past six months that he should be entitled to have of any equity. I agree that I don't think there will be any equity but he wants to pay to have the house evaluated before he moves out. Thank you for your feedback. I needed to hear from an unbiased party.

 

[WebJunkie]

Well, logically, he does have /some/ equity if there is any in the house.

Granted, this is personal opinion, not legal, but if you wanted to show him how much/little of the equity he would be reasonably allowed to claim in the house, do this:

What you will need to know, to mathmatically figure out what he has put toward any equity that comes up would be how much of those 6 mortgage payments was on the principal, and how much was interest. The payments on the principal are what we're interested in. Let's say it was ~$200 a month. I have no idea, I'm just guessing here to show you numbers.

He put in the following:

$600 + ($200 * 6) == 1800

You put in:

$6000 + ($200 * 6) == 7200

That makes a total of $9000 'put into' the house.

1800 / 9000 = 20% (0.2)

7200 / 9000 = 80% (0.8)

so, say the house now has $10,000 in equity, you and he could show number wise he has a 'right' to $2,000.

If the principal on the mortgage was higher, then he would get more % in this, if it was lower, he would get less, but you have to remember there is principal payments that go towards equity as well.

As to what anyone is entitled to under the law, I have no idea, someone else might be able to get you better idea on that, but I think most would agree that this would be a rather fair way to figure out actual percentage of equity. Interest portion of the payments is a wash as it's the 'tax' on not paying for it all at once so to speak. If you really wanted to be complicated you may even be able to justify adjusting his part of the principal payment monthly to match his % of contribution, but that might be a little over the top.

Bottom line, just counting it from the down payment is likely to cause some issues, but if you show him you're taking into account payments he made monthly, then perhaps he may be a bit more reasonable with you.

Granted, you could argue that his half of the monthly mortgage was rent, but I can't say that everyone would see it that way.

Again, not a 'legal' opinion, but, I feel, a reasonable opinion from an outsider. Take it as what you will.

 

[watchingno1]

Thanks for the update. Currently, our mortgage payments are interest only. There has been nothing paid toward the principal, so I guess, he really doesn't have a legitimate claim.

 

[WebJunkie]

Well, then his part of any of the equity that may exist would be:

600 / 6600 = 9.09% (.090909090909090909)

At least to a reasonable standard anyway. Again, not a lawyer, not a legal opinion, just a reasonable guestimation of what seems fair to me.

A real simple way might be to give him back his down payment, with maybe some extra added as 'interest', and call it all good in your book. Especially if you have the money to do so.

You are the only one on the paperwork. Unless you have a written contract with him, stating that he was investing into the home with you, you essencially 'borrowed' $600 from him for the down payment. I'm pretty sure with real estate contracts *are* required, at least about ownership of real estate, so I don't believe that having a 'verbal understanding' will carry a lot of water.

Tell him you're going to pay him back what you borrowed from him, with a little bit added for 'interest' if you want to be nice and make this quick.

Your not married, he's not on the paperwork, he doesn't have a 'stake' in the house. But you did take some money from him to get the house, so give him his money back.

Again, not a legal opinion, just my thoughts.