divide the mortgage

Guest 0.10 Dollars($)

we are trying to buy a house which will be $200,000 and two-family house with one of our friend's family. I do not have enough money to make the down payment so they will be putting around $40,000 towards the down payment, total of both. any suggestions on how we should divide the overall payments towards the mortgage and also how the share of our ownerships should be divided would be really helpful. we are nearing our decision to buy and like to have the division made out before we approach any bank for the loan. John Perry in MI

colin · Posted: Tue Oct 31, 2006 1:07 pm Post subject:

Hi John,

If both the families, your and your friend’s are going to have equal shares in the house i.e., both of you will own 50 percent of the house and also pay all the involved costs in equal half shares, like the maintenance and property taxes.

Then as you will be providing the bigger part of the purchase price in comparison to the other family (because your percentage share comes to $100,000 and your friend's, after deducting the down he is making to $60,000 of the mortgage), you will have to pay 5/8 (100 by 160) and your friend will be sharing 3/8th of the monthly mortgage payments.

Thanks
Colin

Guest 0.10 Dollars($)

I too agree with this arrangement that Colin is talking about, as his friend is making the down payment which will reduce the overall cost for the mortgage and will help to get a better interest rate and also reduce mortgage insurance charges.

blue · Posted: Tue Oct 31, 2006 1:52 pm Post subject:

Hi John,

The ratio Colin has suggested might be difficult for you to continue with as then you will have to afford the larger share of the payments (5/8th) and it will be your decision to go for or not.

There can be another alternative way in which let us assume your friend pays more towards the loan along with the $40,000 for the down payment.

In such a situation he will have 3/5 portion of the house (120/200, assuming he pays some extra apart from the $40,000 down) and you will have 2/5th. In addition, then it will be the responsibility of your friend to pay maintenance cost for the house and taxes to an amount equal to 3/5 of total of such costs. However, in that situation the monthly mortgage dues will be divided in equal portion for you to share, i.e., a 50 percent equal division.

Thanks
Blue

sara · Posted: Wed Nov 01, 2006 12:07 am Post subject: RE:how to divide loan payments

Hi John,

I personally feel it is better to divide the payments in the ratio of the respective shares of interest that you and others have in the property. But they may ask you to pay more, at least pay a half of the down payment, that is, $20,000 more than the amount corresponding to your percentage of interest in the property.

Thanks,

Sara.

mcole · Posted: Wed Nov 01, 2006 6:25 am Post subject:

I might suggest a completely different approach.

Just split everything 50%-50%, including the mortgage payment. But in addition, create a note in favor of your friend for half of the down payment.

That way you would just be making an additional payment to your friend for your half of the down payment. You could even make the interest rate the same as the loan if you wanted.

One key advantage to this approach is that you could pay off that note at any time without having to worry about how to restructure the mortgage payment again.

Cool

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