I am trying to draw up a cohabitation agreement between myself and my common-law spouse and I need help with putting something together that is fair to both parties, hoping this community can provide some help.
We purchased a home 16 months ago for $410,000 with down payment and legal fees paid by me alone. The final cost was approx $417,000 after legal fees which I paid $90,000 total. We borrowed $20,000 from my mother and $307,500 from the bank. We are on title as "tenants in common" and because of the hasty purchase, divided ownership 60/40 in my favor just to acknowledge the difference in our contributions until we could get a cohab agreement together. I realize that 60% does not adequately protect my down payment, but it's better than 50/50!
The house has increased in value to about $500,000 and my partner should obviously benefit from this increase should we separate but I feel that my share should increase proportionally with the $90,000 I contributed. I'm not sure the most fair way to do the math. There are a few scenarios I've come up with:
1. If $90k represents 22% of the final amount ($417k), I should receive 22% of the current value of the home, i.e.. $500k x 22% = $110k - I would receive $110k, then we divide whatever is left after the bank and my mother are paid off. (When are legal and real estate costs taken off, before my portion or after?)
2. If the home increases in value by x%, (currently 18%) that percentage should be added to my 90%, then the remainder will be divided equally after costs.
Another question I have is how the real estate fees and mortgage pentalties would be factored in. For instance, if we separate but I want to stay in the home, do we factor in what it would cost if we WERE to sell the home and divide the money with these costs considered?
There are more questions but I'll let you get started on this so far and we'll go from there. Thanks in advance for your help!