joint mortgage

[kdawg]

Hi,I currently own half a mortgage/house with my sister. She has been paying the full mortgage for the past few years with her husband. She regards the mortgage as a subsitute for a pension as do I, but what would happen in 20 years when we both go to sell it - wouldn't she benefit more from the sale having paid off more of the mortgage? My concern is that I will lose out. I'm currently living in rented accomodation as she wants to live there - will this affect my investment in the long run?

[gammaray]

It depends largely on the sort of relationship you have with your sister. In the first instance you should talk to your sister to discuss what you ultimately want out of the property. As the mortgage is in joint names no one has a claim on the whole property as a matter of right regardless of who pays what. Your sister may well be entlted to a bigger share of the final equity value as she will have made more of a contribution to paying off the mortgage over time. This will have to be tested in court if you can't agree.

[Golden Shred]

The answer to your question is no. Your sister has exclusive use of the house and has also moved in a man who pays you no rent. She is (rightly) paying the full mortgage which can and will be taken as equal to the rent she should be paying to you for the exclusive use of the house, and the increase in value of the property of which you will receive half can and will be taken as equal to the rent that the man she has moved in should be paying. There is no finely tuned bean counting in this sort of matter - the broad brush that I have just outlined is what will prevail should push come to shove.

[WendyS]

One other important thing to remember. When this house is finally sold, if you are still living in rented accommodation or some other property, it may not necessarily be counted as your prime residence and you may have to pay capital gains tax on your share of your profits, while your sister who is counting it as her prime residence, will not be subject to this tax.

[Killerschick]

I would recommend that maybe the two of you get this sorted out now by drawing up some sort of deed with a solicitor and registering yourselves as tenants in common rather than joint tenants if you haven't already done so. If you currently hold the property as joint tenants, if you die, your sister automatically inherits the house and vice versa. You might want to leave your half to someone else and she might want to leave her half to her husband. This might have been sorted out by your conveyancer when you bought the property but it should be looked into and you might also want to come to an amicable agreement about shares in the property.

One thing I would say about your sister maintaining the mortgage is that the position may be different dependant on whether the mortgage is repayment or interest only. If it's interest only then I would agree with Golden Shred's argument that maintaining the mortgage is equivalent to rent as the mortgage stays static and the only increase in the equity is from increases in the property value. However, if the mortgage is repayment your sister is reducing the mortgage so the equity is increasing not solely as a result of property value increases. In this instance I actually think your sister would have a pretty good argument for more than 50% of the equity. What she could claim might be limited to the amount the oustanding balance of the mortgage had reduced by since she took on sole responsibility for the payments. Mind you, if the sale doesn't happen for 20 years and your sister has cleared the capital balance of the mortgage in full that could be a sizeable amount.