NEW YORK (TheStreet) -- After happily dating you've decided to move in with your significant other. Congratulations!
Now it's time to address a headache-inducing issue: If you start chipping in on the mortgage payment, how would the two of you divvy up the home equity if you were to part ways? Or suppose one of you was run over by a bus. How would the equity be apportioned between the survivor and the other partner's heirs?
The two of you can agree on anything you want, of course, but you could set up a system that would also make sense to anyone else with a stake in your estates, such as children from previous relationships. Here's how.
First of all, the home's initial owner -- let's call her Jane -- would have sole right to the equity built up before party No. 2 -- John -- starts chipping in. If Jane paid $200,000 for the home 10 years ago and it's now worth $250,000, that $50,000 in additional equity is hers. So get the current value appraised, or agree on a number after checking values on sites such as Zillow.
Jane is also entitled to get back her down payment. Let's say that was $20,000. So the first $70,000 from a sale goes to Jane.
She also has a right to the equity created by paying down her mortgage balance before John came along. If she started with a $180,000 15-year loan five years ago at 6%, she'd now owe about $137,000. So that's another $43,000 in equity that belongs to Jane, bringing the total to $113,000.