Coinvesting in an Apt without being on the Mortgage?

I’d appreciate any advice, or a referral to a lawyer whom I could pay to give it, for the following: My partner and I are buying an apartment in Park Slope, but we’re not doing it 50/50 (he has more money than me), and he is going to be the exclusive person listed on the mortgage. We agreed that I would “buy in” and be 1/4 owner by paying 1/4 of the down payment and closing costs, which works out to about $50k. I’ll also pay 1/4 the mortgage and taxes moving forward. A couple questions come to mind: 1\. what is the best way to capture this arrangement in a legally-binding way? should we have a lawyer draft up a contract? (a lawyer friend says that’s unneccessary, getting an IOU type document notarized is good enough) 2\. should I ask that my name be on the deed? 3\. what are the potential tax implications for me (and my partner) if I transfer $50k from my bank account to his for the down payment? I trust my partner, he’s a good man and I don’t foresee him not honoring our agreement on this, even if we had an unpleasant breakup. He’s not going to take my money and disappear or anything, but I do want to make sure I’m protected and that we don’t run into tax issues. Thanks for any advice or leads for legal resources!

stoopsale

in Lawyers and legal service 13 years and 10 months ago

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bkmatthew | 13 years and 10 months ago

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Personally, I would consult an attorney with expertise in estate planning. The bank will likely want you both on the mortgage with joint and several liability. If you’re buying a co-op the co-op’s board will likely weigh in as well. How you arrange your affairs is really your business, but as an unmarried couple you really don’t get much support from family law. Your partner may not ever treat you badly, but can you say the same about every member of his extended family? Or yours for that matter. If something were to happen to either of you, I am sure one or other of you has an unscrupulous relative that would be prepared to sue to try and get their hands on some money. You can circumvent a lot of these sorts of problems with proper estate planning. In the event that you have or adopt children, estate planning becomes even more important.

likemike | 13 years and 10 months ago

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If what you’re concerned about regarding the mortgage loan is good rates, you know you can always buy points to bring it down. By not having your name on the mortgage/deed, you have so much more to lose out on if the relationship does not work out. The other option is also not being involved in the downpayment/closing, and instead when you move in you can pay a portion of the mortgage as if you were renting. That’s less complicated.I also agree with your attorney friend, any written agreement signed by both parties is considered a contract by law – so technically if you do want what you both agreed on in a legally binding way you can go that route….but the question is what purpose will this serve for you?

shahnandersen

in Lawyers and legal service 13 years and 10 months ago

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The solution to your situation is both legal and very highly personal.  If I was in that situation I would buy the house in joint tenancy with both names on the deed and both names on the mortgage.  Split the down payment equally with your partner providing you with an interest free loan to reduce your actual outlay to $50K.  That way there are no gift issues.  The bank only receives one check per month.  Assuming it’s drawn on your partner’s account (or on a joint account), they do not care how he is reimbursed for your share.  Who pays Con Ed, National Grid, contractors, etc. really doesn’t matter.  As far as the IRS is concerned you have split those costs 50-50.  Note that I am neither a lawyer not a tax accountant (but am an owner of a house in Joint Tenancy), but I am pretty sure that this will work practically taxwise.

daveinbedstuy | 13 years and 10 months ago

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Consult an attorney on the title issues.  Consult a goo mortgage broker on the mortgage issue.  The $50k transfer will be a problem.  There’s no reason (other than one person having extremely bad credit) that you won’t get better terms with 2 on the mortgage.A good attorney who specializes in both estates and RE is david fainkick…718-840-5860.  Being “partnered,” the two of you need better legal advice.Adam Dahill is a very good mortgage broker

stoopsale | 13 years and 10 months ago

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So, we haven’t considered putting my name on the mortgage because a) we think we’ll get a better rate if he puts his on solo, b) it seemed to over-complicate things (but perhaps that’s naive considering how complicated this other scenario may be).

slopette | 13 years and 10 months ago

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Maybe this is naive, but what’s the benefit of not being on the mortgage?

levicapland | 13 years and 10 months ago

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Call Avi Popack. This is what he does. 516-695-2452\. He is located in Brooklyn. He will give you advice over the phone….. Levi SoHo Appliances 347-276-6528

slopegirl | 13 years and 10 months ago

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I’d get a lawyer to write it up now that everything is happy and agreed upon, I think being the person with less assets it’s not a bad thing to define your position. You’re going to hire a lawyer to do all the real estate work anyway, why not spend the extra $500 and just make it official?

likemike | 13 years and 10 months ago

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If your name isn’t on the mortgage can’t they add your name to the deed? I think your best bet is to consult with your real estate attorney and mortgage person (and maybe even accountant). This is tricky because $50k is a huge lump sum you’re transferring into his bank account for the downpayment/closing. According to the IRS I believe $13k is the max annual gift contribution you can give someone without reporting it on your taxes. http://hubpages.com/hub/Annual-Gift-Tax-Exclusion-Amount-for-2009–2010 But be sure though that the assets (your 50k) exist in his name first in order for him to apply for the mortgage. Otherwise, he will not qualify for the X amount on the mortgage he is taking from the bank. Of course your mortgage person can always change that amount before you close.

daveinbedstuy | 13 years and 10 months ago

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For one thing, the bank is going to ask him to provide detaills as to where the $50k came from. Secondly, no ,matter how much you trust your partner now, things could always change in the futute. get a lawyer. Why don’t you want to be on the mortgage anyway?