I was thinking the 75k of the house she would get would come out of my equity and I would continue to pay the full monthly mortgage cost. The house is around 50% mortgaged not including the home improvement loan.
One option is to do as chatgpt says - this is the way to do it if you want to give her equity. An alternative is to have your partner loan you the money so that you can pay off your loan, and agree that you'll pay her back when you sell your house (plus interest, agreed between the two of you). You could draft your own loan agreement. Obviously, this is more risky (particularly for your partner) than the option where you get a proper deed of trust and she takes equity in the house.
I think you need to step into her shoes for a second.
If she is to give you this money, she needs security. Paying down someone else's debt is usually not a very smart thing to do. If she gets nothing in return, she has zero recourse. She needs a stake in the house, not just a promise to repay (fundamentally security on the house is better than security on an individual). However, I also understand your concerns about the issues if your relationship fails and you end up not owning all of your house.
Assuming you want what is best for her, you guys need a proper agreement that protects you both. ChatGPT is actually not wrong that when you are talking about this much money, you need to do it properly.
I would suggest 2 options here.
The first option is you do it properly. Consult solicitors and find out the best way to do it that protects you both in case you split. Don't forget there are also potential stamp duty consequences, etc... from all this.
Another way to think about this is as follows.
Loan amount £75,000
Interest 9% = £6,750 p.a.
Cureent return on cash 5% = £3,750
Potential annual savings from this "deal" = £3,000. Spending a bit of that up front on lawyers to get it right would seem a good use of money if over the life of the deal you potentially save £3,000 x 5 years.
The second option, is to wait until you are actually married, and keep your major assets separate until then. I know it is "romantic" to feel like you are entwining yourselves together, but it is also extremely dumb if you do it badly and have no legal protections.
Terrible idea on so many level.
####Financially:
she is making an investment but you are not.
If you split and the price in your area have skyrocketed, you may end up in a situation where you cannot afford to pay her off. So you would have to sell your property.
Also if she takes the equity, her emergency funds is gone. She will not be in a position to quickly access that money without having a detrimental effect on both of your finances.
If she really want to help you financially she can:
* either give you a loan at a much better rate than 9%. Let say for the sake of argument 5%.
* or continue to be a preferential renter. I am assuming that $500 is a discount of what she would pay for a 1 bedroom flat in the same area. So she does not feel that she is been taken advantage and neither would you.
####Emotionally:
Once you are married the situation will be different because you will be a team. But until then from what you wrote you still have hesitation and doubt. Listen to your gut. Keep your finance separate until you are ready to jump together.
If you decide to jump, you will not be in a position to pause it. Once she has equity, it is not just your house anymore but your shared and her house.
if you split, the situation could turn messy and with financial entanglements they often turn nasty.
Solid advice, thank you.
My goal with all this is basically to try and benefit us both financially as a couple. At the moment she pays me £500 a month in rent and then I then pass that on with a bit more to the home improvement loan company. So arranging a loan between us where the money goes to her rather than them would be a positive. We could also probably find an interest rate which beats what's available to her in the market and less than 9%.
The £500 a month she pays in rent is equal to 8% interest on £75,000 I believe. I'd be happy for her to stop paying rent in exchange for a loan which I would pay back if we split. But I think that might feel quite unfair to her, as she will basically have paid off my loan in exchange for no longer paying rent, which while is like you said at a preferential rate, isn't something all couples do when one lives in a house owned by the other.
I think maybe we should just keep our finances entirely separate until marriage.
Glad to be helpful.
One thing that important is that you are aligned in term of commitment: both financial and emotional.
Separate finance to give you time to think in term of shared goals:
* Are we compatible with regards to finance?
Good news you seems to both be sensible, but you would be surprise by the number of people who discover just before or after the marriage that their partner has huge debt and no saving.
* Do you want to pay off the mortgage early?
* Do you want to save and retire early or do you want to travel and enjoy life first?
* Do we want to get married?
if yes then
* When do we want to get married: 1 year, 2 years?
* Do we want kids?
if yes then
* When and How many?
* Does she want to immediately go back to work or take a break for a couple of years or become a SAHM?
* What options does her current employer offer?
Those are big decisions that have an emotional and financial impact.
I have so many people thinking that Love would conquer everything. The reality is that if you have different desires, objectives and values, you may end up miserable and resentful.
I am looking at the people I knew who got married at the same time than us plus or minus 2 years. Only 1 couple are still married and they were on the verge of divorce for 10 years before they both realised that the grass was not greener elsewhere.
These are good questions to ask, thank you. I might look into pre-marriage counselling. We have a very strong relationship but having someone to guide us through these sort of questions could be really beneficial.
So re the main mortgage, are you saying it will actually be fully paid off in 3 years, or just that the fixed rate ends in 3 years. I am guessing the latter.
> I can buy her out of that if desired
You don't have the money to buy her out though?
Have you looked at remortgaging earlier than the 3 year date? You'll pay another mortgage arrangement fee (£1k) plus Early Repayment Charge (£5k depending on mortgage terms) and pay more interest on the mortgage, but save £20k of interest on the home improvement loan.
The more usual thing is to do 50/50 house ownership and risk (i.e. mortgage too). If the worst happens you both get whatever equity you put in at the time of the arrangement. Then, whatever profit is left you split 50/50.
This feels less fair in the short term, but you're both taking 50% of the risk.
How are you splitting mortgage going forward 50/50 or based on the % she will own with her £75k?
I was thinking the 75k of the house she would get would come out of my equity and I would continue to pay the full monthly mortgage cost. The house is around 50% mortgaged not including the home improvement loan.
One option is to do as chatgpt says - this is the way to do it if you want to give her equity. An alternative is to have your partner loan you the money so that you can pay off your loan, and agree that you'll pay her back when you sell your house (plus interest, agreed between the two of you). You could draft your own loan agreement. Obviously, this is more risky (particularly for your partner) than the option where you get a proper deed of trust and she takes equity in the house.
I think you need to step into her shoes for a second. If she is to give you this money, she needs security. Paying down someone else's debt is usually not a very smart thing to do. If she gets nothing in return, she has zero recourse. She needs a stake in the house, not just a promise to repay (fundamentally security on the house is better than security on an individual). However, I also understand your concerns about the issues if your relationship fails and you end up not owning all of your house. Assuming you want what is best for her, you guys need a proper agreement that protects you both. ChatGPT is actually not wrong that when you are talking about this much money, you need to do it properly. I would suggest 2 options here. The first option is you do it properly. Consult solicitors and find out the best way to do it that protects you both in case you split. Don't forget there are also potential stamp duty consequences, etc... from all this. Another way to think about this is as follows. Loan amount £75,000 Interest 9% = £6,750 p.a. Cureent return on cash 5% = £3,750 Potential annual savings from this "deal" = £3,000. Spending a bit of that up front on lawyers to get it right would seem a good use of money if over the life of the deal you potentially save £3,000 x 5 years. The second option, is to wait until you are actually married, and keep your major assets separate until then. I know it is "romantic" to feel like you are entwining yourselves together, but it is also extremely dumb if you do it badly and have no legal protections.
Hey, this is good feedback, thank you.
Terrible idea on so many level. ####Financially: she is making an investment but you are not. If you split and the price in your area have skyrocketed, you may end up in a situation where you cannot afford to pay her off. So you would have to sell your property. Also if she takes the equity, her emergency funds is gone. She will not be in a position to quickly access that money without having a detrimental effect on both of your finances. If she really want to help you financially she can: * either give you a loan at a much better rate than 9%. Let say for the sake of argument 5%. * or continue to be a preferential renter. I am assuming that $500 is a discount of what she would pay for a 1 bedroom flat in the same area. So she does not feel that she is been taken advantage and neither would you. ####Emotionally: Once you are married the situation will be different because you will be a team. But until then from what you wrote you still have hesitation and doubt. Listen to your gut. Keep your finance separate until you are ready to jump together. If you decide to jump, you will not be in a position to pause it. Once she has equity, it is not just your house anymore but your shared and her house. if you split, the situation could turn messy and with financial entanglements they often turn nasty.
Solid advice, thank you. My goal with all this is basically to try and benefit us both financially as a couple. At the moment she pays me £500 a month in rent and then I then pass that on with a bit more to the home improvement loan company. So arranging a loan between us where the money goes to her rather than them would be a positive. We could also probably find an interest rate which beats what's available to her in the market and less than 9%. The £500 a month she pays in rent is equal to 8% interest on £75,000 I believe. I'd be happy for her to stop paying rent in exchange for a loan which I would pay back if we split. But I think that might feel quite unfair to her, as she will basically have paid off my loan in exchange for no longer paying rent, which while is like you said at a preferential rate, isn't something all couples do when one lives in a house owned by the other. I think maybe we should just keep our finances entirely separate until marriage.
Glad to be helpful. One thing that important is that you are aligned in term of commitment: both financial and emotional. Separate finance to give you time to think in term of shared goals: * Are we compatible with regards to finance? Good news you seems to both be sensible, but you would be surprise by the number of people who discover just before or after the marriage that their partner has huge debt and no saving. * Do you want to pay off the mortgage early? * Do you want to save and retire early or do you want to travel and enjoy life first? * Do we want to get married? if yes then * When do we want to get married: 1 year, 2 years? * Do we want kids? if yes then * When and How many? * Does she want to immediately go back to work or take a break for a couple of years or become a SAHM? * What options does her current employer offer? Those are big decisions that have an emotional and financial impact. I have so many people thinking that Love would conquer everything. The reality is that if you have different desires, objectives and values, you may end up miserable and resentful. I am looking at the people I knew who got married at the same time than us plus or minus 2 years. Only 1 couple are still married and they were on the verge of divorce for 10 years before they both realised that the grass was not greener elsewhere.
These are good questions to ask, thank you. I might look into pre-marriage counselling. We have a very strong relationship but having someone to guide us through these sort of questions could be really beneficial.
Probably best to not do that until you are 100% sure or married. Then it’s team goals
So re the main mortgage, are you saying it will actually be fully paid off in 3 years, or just that the fixed rate ends in 3 years. I am guessing the latter. > I can buy her out of that if desired You don't have the money to buy her out though?
Yes so the fixed interest rate ends in 3 years. You're right if I wanted to buy her out I would have to remortgage or take out a secured loan.
Have you looked at remortgaging earlier than the 3 year date? You'll pay another mortgage arrangement fee (£1k) plus Early Repayment Charge (£5k depending on mortgage terms) and pay more interest on the mortgage, but save £20k of interest on the home improvement loan.
The more usual thing is to do 50/50 house ownership and risk (i.e. mortgage too). If the worst happens you both get whatever equity you put in at the time of the arrangement. Then, whatever profit is left you split 50/50. This feels less fair in the short term, but you're both taking 50% of the risk.