One roommate owns, one doesn't; how to handle?
February 13, 2006 4:25 PM Subscribe
I own a condo with a mortgage and tax deductions and equity. SO moving in. How do we split expenses fairly? Many other questions about financial logistics.
posted by commander_cool to work & money (20 answers total)
I've owned a condo for several years and have built up extensive equity between putting in more money and the ridiculous local real estate market.
SO is likely moving in soon, and my life will be much the better for it. Happy Valentine's Day!
It doesn't make sense for both of us to move and get a new place: I have more money than SO does so we just end up with a new problem, we both like the place, SO needs to move anyway because of expiring lease, and the location is great. Also, I just refinanced at a much lower mortgage rate than I could get now, so any move would put us in a downgrade even if I could psychologically accept the loss of sunk costs.
Assume that SO doesn't have the free cash flow to simply pay me for a half-share ownership of the condo, in which case we could just change the title and split expenses down the middle. How do we handle this financially instead?
1) Do we just split the mortgage? If so, what does that do to our tax situation, given that I'm deducting the interest and taxes on my federal taxes? (Odds are that I'll be in a higher bracket, so it would make more sense for me to have the deductions.)
2) How do we handle the fact that a substantial portion of my mortgage check is building up equity? Does SO end up with an ownership interest? (And if so, how much money does SO end up getting when the condo is sold? Or heaven forfend, when SO realizes GOB-style "I've made a huge mistake" and moves out?) Or should we simply treat the equity portion of the bill as my responsibility?
3) If we split expenses some other way (putting her in charge of paying for food, utilities, and the non-deductible condo fee), is this imputed rent income that I need to treat as taxable income? Too, it's hard to add all those smaller expenses up in a way that seems like a fair division, given the size of the mortgage expense.
4) Or do I just say that I'm so thrilled to have my SO move in that I want to handle all of the financial expenses myself? I could afford this to be sure (I'm already paying expenses by myself), but I think SO would actually feel threatened by this.
5) I don't need a prenup for this, do I? SO is an economics major and future heartless lawyer, so it might not be too disastrous if I had to suggest one.
Many thanks, Mefites.