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Author: mispoken One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Mortgages and equal ownership Date: 6/7/2009 1:29 PM
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My girlfriend and I are going to buy a condo together in the next month or two. The city of Chicago has a great tax incentive program going right now, but our two incomes combined will exceed the maximum income allowed for the program. I am considering just getting the mortgage in my name to keep us under the income limit. We both would still own equal parts and make all payments and down payments together. If we did something like that would we both still be able to claim mortgage interest paid and the first time home buyers tax credit equally? I'm just curious to know if the mortgage is in one name what the tax ramifications if any would be, she would still be on the title of the home if that is possible. Thanks!
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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106228 of 121219
Subject: Re: Mortgages and equal ownership Date: 6/7/2009 1:44 PM
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mispoken: "My girlfriend and I are going to buy a condo together in the next month or two."

Think long and hard about this choice. I am sure that Phil will be along sometime with his $0.02. If you still decide to do this, then spendsome time and money to obtain a good co-owners' agreement!!!

"The city of Chicago has a great tax incentive program going right now, but our two incomes combined will exceed the maximum income allowed for the program. I am considering just getting the mortgage in my name to keep us under the income limit. We both would still own equal parts and make all payments and down payments together."

You need to investigate further. I am uncertain whether any lender will loan you 80% of the value of the condo if you own only 50% of the condo.

"If we did something like that would we both still be able to claim mortgage interest paid and the first time home buyers tax credit equally?"

I amno tax expert, but defintely no on the mortgage interest; she cannot claim a deduction for paying interest on a mortgage that she does not owe.

"I'm just curious to know if the mortgage is in one name what the tax ramifications if any would be, she would still be on the title of the home if that is possible."

No sane lender will loan on the full value of the house and take a mortgage on only 1/2 the house!

Regards, JAFO

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106229 of 121219
Subject: Re: Mortgages and equal ownership Date: 6/7/2009 2:22 PM
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My 2 cents: What JAFO said, with a heavy emphasis on point one. The time to get everything set out in writing is while everybody's happy and agreeable. Divorce courts settle these things for married people when things go awry, and there are well-established rules. Not so when co-owners aren't married.

Today's bonus penny's worth: Have you talked to potential lenders? I'm not sure exactly what you're planning, but it doesn't sound like you can do it. You might want to inquire over on the Buying/Selling a Home board, where some mortgage pros hang out.

Phil

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Author: mispoken One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106230 of 121219
Subject: Re: Mortgages and equal ownership Date: 6/7/2009 2:44 PM
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A lawyer will be consulted to draft some documents to protect both of us. So you are saying it is unlikely a lender will loan money to one person with two people on the title?

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106231 of 121219
Subject: Re: Mortgages and equal ownership Date: 6/7/2009 2:46 PM
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How about you, alone, buy the house and pay the mortgage and the taxes, and the two of you apportion her income somewhere else--perhaps she buys the food, for example. Or she pays utilities. The two of you work out a budget that is fair, but the house is in the name of just one person.

As Phil says, two unmarried people owning the same house just too complicated if you part ways. And if you are sure you won't part ways, ever, then get married and be done with it?

Best wishes, Chris

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Author: mjs111 Big red star, 1000 posts Feste Award Nominee! Old School Fool Coverage Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106232 of 121219
Subject: Re: Mortgages and equal ownership Date: 6/7/2009 4:13 PM
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A friend of mine did this with his girlfriend and they have since split up. They get to see each other all the time since they have to go over the finances of the mortgage, rent checks from their tenant, upkeep, taxes, etc.

Really awkward.

Wish you the best,

Mike

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106233 of 121219
Subject: Re: Mortgages and equal ownership Date: 6/7/2009 5:36 PM
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So you are saying it is unlikely a lender will loan money to one person with two people on the title?

No, I'm saying that in today's cautious lending market it's important to shop for money before you shop for a house, especially when you're talking about something unusual.

Phil

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106234 of 121219
Subject: Re: Mortgages and equal ownership Date: 6/7/2009 8:07 PM
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So you are saying it is unlikely a lender will loan money to one person with two people on the title?

It is possible for two people to be on a title and only have one of them on the mortgage. Generally, the person who is not on the mortgage will have to legally subordinate their claim on the property to the mortgage lender's claim on the property. That avoids the 'lending money for the whole property, when the person they are lending money to only owns 50%' issue.

Additionally, the single person on the mortgage will have to qualify for the mortgage on their own income, generally without counting on 'roommate' income from the other person. In this case, when one persona can qualify for the mortgage without needing the other person's income, it's generally easier and less complicated in the long run for that person to buy the property, and have the person not on the mortgage pay for other things in the budget. (Joel and I do this - I own the house and he pays for utilities.) If the two people eventually get married, then both will benefit from any gain in the property. If they break up, it's a lot less complex to do so.

I do agree with Phil that especially with all of the complexities you are proposing for this process, it is REALLY IMPORTANT to have the financing in place before shopping for a property. Even in normal circumstances, it's important to have financing in place first, but in this case, it is imperative.

AJ

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106238 of 121219
Subject: Re: Mortgages and equal ownership Date: 6/8/2009 9:38 AM
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I am considering just getting the mortgage in my name to keep us under the income limit. We both would still own equal parts and make all payments and down payments together. If we did something like that would we both still be able to claim mortgage interest paid and the first time home buyers tax credit equally? I'm just curious to know if the mortgage is in one name what the tax ramifications if any would be, she would still be on the title of the home if that is possible.

One more thing - your tax ramifications on a go-forward basis may actually cost you money to buy this way.

As already mentioned, your GF will not be able to deduct her share of the mortgage interest, since she is not on the mortgage. You, on the other hand, will get a 20% tax credit for your half of the interest paid (assuming that you are splitting the mortgage costs 50/50). Does your 20% credit more than make up for GF's loss of her interest deduction? (If GF's income is close to yours, probably not.) If so, how will you provide her with that benefit, since you seem to be wanting to split everything 50/50? Will you run into gift tax issues if you choose to gift her the money?

Also, will GF be able to take full advantage of deducting property taxes if she does not have the mortgage interest deduction? I know that Illinois has state income tax, which is also deductible, so she may be able to, but if not, that's an additional deduction on her side that your 20% credit would need to make up for.

AJ

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