Ask an advisor: Why am I paying my boyfriend's mortgage?

July 3, 2024 2:17 PM

A young couple in Providence (not pictured) splits the mortgage payments on their home, but only the boyfriend owns it.

Welcome back to "Ask an Advisor," the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.

Over the past few years, housing costs have skyrocketed. Since 2020, the average selling price of a house in the U.S. has jumped by 34%, according to Federal Reserve data. Meanwhile, the average 30-year mortgage has risen to almost 7%, according to Freddie Mac — the highest rate in decades.

All of this has sent rents soaring. A study by StreetEasy found that from 2019 to 2023, American rents rose by 30.4% — far faster than wages, which grew by 20.2%.

To cope with these costs, Americans have gotten creative. Young urbanites share rents with roommates, family members or significant others. Or, in some relationships, the significant other is the landlord: One partner owns the home and the other contributes to the mortgage payments.

But is that fair? Under such an arrangement, only one partner is building their home equity, while the other essentially pays rent. One such couple lives in Providence, Rhode Island, and the renter's sister is concerned.

Here's what she wrote:

Dear advisors,

My sister and her boyfriend are in a committed relationship and are living together in a house he bought before they met. They now split his mortgage payments and expenses (internet, electricity, etc.). This amounts to substantial savings for my sister — her "rent" is now $600, down from the $1,350 per month she paid for her last apartment.

On the other hand, her boyfriend is getting the bigger benefit of continuing to build equity in his home, with her help. Her name is not on the deed, and they are not married. Unspoken in this arrangement is the fact that if they ever did break up (though I think that's unlikely), he would keep the house and she'd never be compensated for her contribution.

This doesn't seem fair to me. Is there a more equitable way for both of them to financially benefit from this situation?

Sincerely,

Perturbed in Providence

And here's what financial advisors wrote back:

Bank the savings

Tom Balcom, CFP and founder of

1650 Wealth Management

in Lauderdale-by-the-Sea, Florida

It's a win-win situation. If the couple breaks up, she will have saved $750/month in rent. If they stay together, they have equity in their home. If she's smart, she should take the $750/month in savings and add the funds to an investment account or open a regular or Roth IRA account. That way she is building up her own equity, which will benefit her if the couple breaks up or benefit both if they stay together.

What's unfair?

David Schneider, CFP and founder of

Schneider Wealth Strategies

in New York City

I understand how you feel, but if your sister isn't paying more than 50% of the fair market rent for the home, plus half of the ongoing monthly expenses, she is being treated fairly. She doesn't have the right to live in the house without contributing to the monthly expenses simply because her boyfriend's name is on the deed. Given the fact that she is paying $600 now versus the $1,350 per month for her last apartment, she's probably making out pretty well.

Prioritize the relationship

John Power, CFP and principal of

Power Plans

in Walpole, Massachusetts

It does seem a bit unfair, but think about it this way: She is enriching her boyfriend a lot less than she enriched her landlord! Relationships aren't necessarily about money, and attempting to fix it might make an important life connection feel more like a financial transaction. Is that worth it? Perhaps not to her. If they marry there might be a way to settle it out, but it depends on how much equity he has in the house, how much he put in, how it gets taken out, etc. It can be very complicated and not necessarily good for the relationship. What is more valuable?

Get it in writing

Jay Zigmont, CFP and founder of

Childfree Wealth

in Mount Juliet, Tennessee

Co-housing is a common trend and is growing in response to rising housing costs. It comes in a lot of forms, but paying rent to a loved one is relatively common. There are two ways to look at this.

1. Your sister is getting a deal on rent, and her boyfriend is the landlord. Like any renter, she has no claim to the property after she stops paying rent.

2. This is part of a long-term relationship, and both of them want to make a commitment. If this is the case, it may be time for a partnership agreement, updating his will, and creating a financial partnership.

It may not seem fair to you, but if your sister is happy with the situation and it works for her, it is all good.