How to split home after a cash out refi with girlfriend

4 Replies

Hi all, I'm looking for ideas on how to fairly split home ownership after a cash out refinance with my girlfriend. The thing is, she owns the house and doesnt qualify for a refinance without me. She has about $120k in equity and we are seeking about $25k. With both live together in her townhouse. She owns it 50/50 with her dad, who just wants his down payment back when we refinance. She's lived there for about 5 years and I just moved in with her about a year ago. We've been together for 3 years. We have similar incomes and split all bills and mortgage evenly. We are very happy and I can see myself popping the question in the next year or so, but we both want some sort of insurance in case things don't go as planned. Even though I'd be half responsible for the mortgage, I feel like expecting half of the equity would be unfair since i kind of just dated-into this equity. Any and all ideas are welcomed and appreciated! Thomas

I wouldn’t be implying anything about marriage until after the paperwork on that has been filed personally. But that is up to you!

My initial thoughts if I understand correctly:

5 years owned, 1 of which included you squatting there. So let’s use round numbers, assume $100k equity:

$50k to dad, $50 to daughter (10 per year if my calculator tells me the truth)... split that last year where you squatted, so 45 to the bride to be & 5 to your banker.

Or just give her the whole 50 and tell her to buy her own ring if you really want to kill the romance.

I would not do this unless you get married. If you end up splitting up the break up will be more complicated if you are on a mortgage together. I would wait until you both decide to get married to do this. Just enjoy life together in the meantime.

If you are set on doing this without getting married then I would at least work with a lawyer to be added on the deed with your girlfriend only. Otherwise you will be responsible for the mortgage but have a lot less leverage if you are not on the deed if your relationship changes in the future. You would also want the father to be removed from the deed.

You are definitely right that expecting half the equity would be unfair.  What is it's current market value?  They will likely do an appraisal for the refinance, which should establish current value.   Basically, you have just been paying rent for the year you've been there, not part-owner.  Now that you're discussing equity in exchange for helping her qualifying for a refi, consider it as buying in at current value, where you benefit 50/50 in any future appreciation over and above current value, while she keeps the equity from her years of ownership after paying her dad back.  If you are actually investing money, like buying her dad out at his 50% of current market value, then 50/50 would be fine.  He can then choose to gift it to her if he wishes, and that would be fair.  But if it's not a good enough investment risk to sign your name with an agreement to split future equity 50/50, then just wait, or maybe convince her to sell it instead of refi, and then you both can invest equally in a new place and start fresh.  

@Thomas Loyola mixing this sort of thing with a significant other is likely a bad idea, not to mention unfair to your girlfriend. Even if she did think this was okay or fair, in reality it probably isn’t.

Refinance if you want, pay her dad back the downpayment, and get him off the mortgage and title if he’s on there. Then that’s it. If down the road you get married, you could look at getting yourself on title but right now I would say that’s not a good idea.

I already own 3 rentals and I also have a fairly serious girlfriend. If we got married I could easily own 8-10 rentals by then. If that’s the case I don’t plan on putting her name on any titles or mortgages. Maybe down the road I’d give her equity in the holding entity but that would be after many years of marriage.

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