# Bought house with a sibling



## razz (Oct 21, 2014)

Hi Folks,

We've just purchased a new home for $560K with my brother. Now I'm learning about all the legalities and financing involved. I have two questions:

1) Does this require us to have a joint banking account? Or can we have separate accounts and have 1/2 the mortgage come from my account and the other 1/2 mortgage payment come from his account?
2) If I was to put down a larger down payment me $90K him $20K (which is 20% to avoid CHMC), do I need to have something signed legally to ensure I get the money back upon sale of the house? Should the money also at least get inflation costs added since I'm setting aside $90K? Also if/when we decide to sell, because one is unable to pay, or one wants to move out. Do we need to have a legal agreement written up on how we will deal with the sale ahead of time? 

Regards,
razz


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## twa2w (Mar 5, 2016)

No you do not need a joint account but the bank will not take 1/2 of the payment from each account.
You have several options. Have the payment taken from your account and have your brother give you his share monthly - or vice versa.
You could open a joint account for the payment and have the bank do an auto transfer from each of your accounts each month, to the joint account for the payment. And for other expenses like taxes, utilities. So each of you put in say 1000 on the first of each month to cover share of all house expenses.
Yes you need an agreement. How do you share expenses and mortgage payments and repairs and maintenance. What if one of you cannot pay etc.
If you sell house for profit do you each get your down payment back, then split profit 50/50?. 
What about a loss on sale which is more problematic. Is there a buyout trigger clause. Ie if you don't get along or can't agree, can one buy out the other. At what price. Will the mortgage company remove a name if this happens.

How is house being registered? Joint tenants or tenants in common?
What happens if one of you is killed. Insurance?

Just a few thoughts. Not an easy agreement to come to terms on.


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## Beaver101 (Nov 14, 2011)

^ Shouldn't all these above questions be asked and decided before the house purchase? Anyhow, who has title to the house?


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## razz (Oct 21, 2014)

twa2w said:


> Yes you need an agreement. How do you share expenses and mortgage payments and repairs and maintenance. What if one of you cannot pay etc.
> If you sell house for profit do you each get your down payment back, then split profit 50/50?.


What if one person is paying a bigger down-payment to bring it up to 20%, saving the CHMC and tax which is about $24K. I guess there is no set rules, and are simply agreed upon between the two people. Because one would be parking more money into the home, I'd assume one would get a little more back upon sale of house. 



twa2w said:


> What about a loss on sale which is more problematic. Is there a buyout trigger clause. Ie if you don't get along or can't agree, can one buy out the other. At what price. Will the mortgage company remove a name if this happens.
> 
> How is house being registered? Joint tenants or tenants in common?
> What happens if one of you is killed. Insurance?
> ...


We've just bought the house. Both our names are on the purchase agreement. I assume titles and joint/common tenant are established upon closing at the lawyers office, which is in a years time. Yes thank you about all the tips. Will have to consider insurance in case of death. But I mean one can also sell the property in that unfortunate event. 

We are also considering renting it out. We'll have to discuss more.
This is probably a question for the lawyer. But is a partnership agreement all part of the standard lawyer closing costs? Or is this something special extra?


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## marina628 (Dec 14, 2010)

We bought a home with somebody many years ago and on paper was a great deal but the other party decided to bail on the deal in year 2.If one of you leave you still need to pay your share of the mortgage payments and as for a person getting a bigger share because of a bigger down payment that should be in the deal.You can buy the house 60/40 ,70/30 etc so if you have already purchased your 50/50 house then all you get is your original money back then split the difference equally.Honestly I cannot believe somebody spends this money on a house and still has all these questions.


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## razz (Oct 21, 2014)

marina628 said:


> If one of you leave you still need to pay your share of the mortgage payments and as for a person getting a bigger share because of a bigger down payment that should be in the deal.You can buy the house 60/40 ,70/30 etc so if you have already purchased your 50/50 house then all you get is your original money back then split the difference equally.


 What do you mean by buying the house 60/40, 70/30? Does this mean paying 70% of the mortgage while the other pays 30%? Or is that simply based on the down-payment amount, while the mortgage payment stays 50/50, though that does not seem fair if you ask me.


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## Spudd (Oct 11, 2011)

Is it too late to back out of the deal? I would strongly consider it if it's still an option. 

I am sure the lawyer would charge extra for the partnership agreement. And I am also sure that you and your sibling should iron out all these details before either of you puts a single penny into this.


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## razz (Oct 21, 2014)

Spudd said:


> Is it too late to back out of the deal? I would strongly consider it if it's still an option.
> 
> I am sure the lawyer would charge extra for the partnership agreement. And I am also sure that you and your sibling should iron out all these details before either of you puts a single penny into this.


Nope it's a done deal, now we're going to work out the details. It's not ideal, but I'm hopeful signing an agreement together is very much doable.


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## marina628 (Dec 14, 2010)

A friend owns a house with his daughter and they pay 60/40 split of the bills but my friend put 100% of the downpayment his daughter put nothing.I think this deal is doomed from day 1 , you obviously feel you should get a bigger share with bigger part of downpayment but reality is not going to work that way.You cannot ask for that now after you already bought a home with your sibling and here is the risk if you ask too much you may put your relationship at risk too.


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## Nerd Investor (Nov 3, 2015)

Yeah, ideally you would work this out before, but to me a simple/equitable solution would be that when you sell, you split your net proceeds proportionally to what each of you put in at the time of sale. 
So if you put a $90K down payment and he put a $20K down payment and years from now you've _each_ contributed $45K towards the mortgage, your split would be $135K/$200K = 67.5% of the proceeds. This way you each have the same ROI on the money you've put in. It's not perfect but it's one suggestion.


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## razz (Oct 21, 2014)

marina628 said:


> A friend owns a house with his daughter and they pay 60/40 split of the bills but my friend put 100% of the downpayment his daughter put nothing.I think this deal is doomed from day 1 , you obviously feel you should get a bigger share with bigger part of downpayment but reality is not going to work that way.You cannot ask for that now after you already bought a home with your sibling and here is the risk if you ask too much you may put your relationship at risk too.


It's his daughter though, this is not a pure business transaction here. I'm just seeking ideas and what the options on how people go about spiting such a transation. It may be good enough If I just get the my down-payment back. But I'd also like to collect inflation on that amount, so I'm not going negative on the money. We'd be saving $24K+interest on the purchase since we won't have to pay CHMC. Believe that is more than fair. I.e. saving my brother and myself $24K and lowering the interest charges by lowering the mortgage.


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## razz (Oct 21, 2014)

Nerd Investor said:


> Yeah, ideally you would work this out before, but to me a simple/equitable solution would be that when you sell, you split your net proceeds proportionally to what each of you put in at the time of sale.
> So if you put a $90K down payment and he put a $20K down payment and years from now you've _each_ contributed $45K towards the mortgage, your split would be $135K/$200K = 67.5% of the proceeds. This way you each have the same ROI on the money you've put in. It's not perfect but it's one suggestion.


I see what you mean. So if a the house was to appreciate 100K at the time of sale, the split would be $67.5K to $32.5K on the appreciation. Wow, that does seem like a large difference. It does make sense from a strictly ROI perspective. But we'll be doing 50/50 on the mortgage payments, so the carrying costs would be equal and does not seem entirely fair. Thank you for the suggestion.


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## NorthKC (Apr 1, 2013)

*sighs* I really wish people would sort this out BEFORE doing the deal. But enough with that.

Definitely get an agreement in place with proof that each of you contributed $xx to the purchase of the house and calculate the percentage and stipulate that proceeds is allocated accordingly. Otherwise, you have no recourse when you sell the house.

Second, if both of you decide to do a 50/50 split, put that into writing as well but make sure you can cover the other half in case the other bails.


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## mark0f0 (Oct 1, 2016)

You need to very strongly consider who is on the hook for losses. Housing prices are declining significantly in Canada after a few years of stagnation. What if $560k turns to $400k (ie: typical of Calgary in the post-2011 era to date), how are you going to split the losses? Do you each have the authority to force a sale? Lots of landmines here. Personally I would have structured this deal to be simply one of you "buys" the house outright, and the other provides some financing for it by way of a 2nd mortgage. The person who 'buys' the house being the sole management decision maker and thus on the hook for profit and loss. Very dangerous this arrangement you've concocted, IMHO.


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## Mukhang pera (Feb 26, 2016)

As noted on another recent thread, this topic has come up more than once. I suggest looking back and some of those threads. The most recent one is here:

http://canadianmoneyforum.com/showt...iiping-a-house-how-to-legaly-protect-yourself

As some here have suggested, there are plenty of pitfalls, so best be prepared.

As an aside, I note the poster to started the thread to which I provided the url apparently did not take well to the comments offered, sounding a note of caution. That one-post wonder "Misha" did not return to the thread or the forum, choosing to go off in a snit, it would seem.


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