By Maude Gauthier | Published on 11 Jul 2024

A few years ago, your partner proudly bought her own house to live in with her son. Since then you two have met and she’s asked you to move in with her. Since cohabitation is going well at her place, you’re thinking of taking things to the next level: you’ll buy half her house. How much should you pay? How do you take into account the fact that its value has changed over time?

You’re not alone in asking yourself these questions. In Canada, almost 12% of families are stepfamilies. Many Canadians find themselves in a similar situation, learning how to calculate the net value of a house in order to buy half of it.

## Assessing Market Value

The basic calculation you need to know is this one: (market value of the house – mortgage) / two. For example, if the house is worth \$300,000, and the remaining mortgage is \$200,000, there’s \$100,000 to divide in half. To acquire 50% of the house, you’ll have to pay your partner \$50,000.

But is her house really worth \$300,000? If that’s the price she paid three years ago, probably not! Should you use the property assessment roll from your city? No, that would be a mistake. These assessments are often lower than the actual value of the homes. An accurate assessment of the property’s current value is essential. The market value is the price it could fetch today if it were put up for sale.

How do you assess this value? Sit down with your partner and browse similar homes on property sales websites. These can sometimes be used to visualize homes sold and the price obtained. If you’re unsure, or if your property is unique and difficult to compare with others, you can call on the services of a chartered appraiser, whose profession is to assess fair market value.

## Calculate Net Worth

Surprisingly, your analysis of comparable homes leads your partner and yourself to agree on a market value of \$350,000! Now you need to calculate the equity she currently holds in her home. Using the same calculation explained in the previous section, there’s \$150,000 in net worth, to be split in two. You therefore owe her \$75,000 (not \$50,000).

Do you have this amount in the bank? If this isn’t the case, you could discuss other ways of splitting the ownership, for example 60-40 or 70-30. In this case, it is important to get a lawyer to write up that when the house will be sold, proceeds will be divided according to this proportion. If your income and assets are unequal, it’s wiser to choose a percentage that won’t hurt either of you in the long run. Alternatively, you could apply for a private loan to make up what you need to pay \$75,000.

Once the value of your share has been established, it does not end there. To make your purchase official, you must share your partner’s mortgage and appear on the title.

## Get Your Name on the Mortgage

If you become the owner of half the house, logic dictates that you should assume half of the monthly payments. To make both of you responsible for the monthly mortgage payments, you must contact the financial institution that granted you the loan. You may have to refinance to do that, depending on the province you live in. If so, your partner may incur penalties for breaking the initial mortgage.

If your name is on the title but your partner is the only one assuming the debt, she’s taking a risk. A better option would be to wait until the mortgage is up for renewal to avoid the extra costs and get your name on the mortgage.

## Get Your Name on the Title

The main part of the process ends with the addition of your name to the title. This is what proves that you really own the house with your partner! Without it, you may lose the money you paid her.

To register your name on the title deed, the process will vary depending on the province you live in. Once it’s done you will have equal rights to the property, which will now belong to both of you in equal shares.

## Will Your Partner Pay Taxes on the Sale?

Your partner paid \$300,000 for her house three years ago. Your assessment of its current market value now places it at \$350,000. She has therefore made a capital gain of \$50,000. Should she be concerned about the tax on capital gains?

If your partner sells you half of her primary residence, she has nothing to worry about. As long as the house has always been her principal residence, she benefits from tax exemption and will not be taxed on the gains made over the last three years.

Maude Gauthier is a journalist for Hardbacon. Since completing her Ph.D. in communications at University of Montreal, she has been writing about finance, insurance and credit cards for companies like Fonds FMOQ and Code F. As a responsible user of credit cards, she can spend hours reading the fine print to fully understand their benefits. Because of their simplicity, she developed a preference for cash back cards. After suffering steep increases with her former insurer, she can now proudly say that she saved hundreds of dollars by shopping around for her auto and home insurance. In her free time, she reads novels and enjoys streaming popular shows (and possibly less popular shows, like animal documentaries).