If you’re friends who want to buy property or live with a boyfriend or girlfriend when you want to purchase a home, then you’re in a situation where you’ll share an asset. For many people who purchase property in this way, the main concern is, “what happens if the friendship comes to an end?”
Unlike in a marriage, assets aren’t automatically divided according to law when you decide to split up. If you decide to go your separate ways and aren’t married, you’ll want to make sure you are protected and can obtain the equity you want out of the property.
A court can’t order for the equity to be divided between the parties, since you’re not married. However, you can take steps to get what you want. What should you do?
You’ll need to figure out how much equity there is to start with. To do this, seek a professional appraisal, so you know how much the property is worth versus the amount that you have spent. It’s hard to work out the value of your equity without a firm appraisal.
Next, work out which share of the home you own. Did you split the cost 50/50? Are you the primary owner at 75 percent? If you have a larger share of ownership, then you deserve a larger amount of equity.
To cash out the property, the best idea is to sell it and split the proceeds fairly. However, you can also opt to refinance the mortgage in only one person’s name, allowing that person to buy you out of your share. If you plan to do this, your attorney can help you draw up a contract so that you don’t end up losing out on the trade.
Source: Zacks, “How to Divide Equity When You’re Not Married,” accessed Aug. 03, 2017