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  • FIRST POST
    • TheAbidingDude
    • By TheAbidingDude 27th Nov 17, 1:29 PM
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    TheAbidingDude
    Buying ex partner out of Joint Share Mortgage - Sanity Check Pls!
    • #1
    • 27th Nov 17, 1:29 PM
    Buying ex partner out of Joint Share Mortgage - Sanity Check Pls! 27th Nov 17 at 1:29 PM
    Hi MSE forums,

    Iím currently going through a particularly messy breakup with my ex partner (not married) and weíre in the throes of settling a buyout for a property we bought as joint owners, with her taking 60% and me 40% at the time.

    My question is around the buyout figure, essentially I want to ensure Iím not being played unfairly.

    The formula sheís applying is as follows:

    Valuation - remaining mortgage, divided pro-rata 60/40.

    Valuation (based on 3 EAs) = £375 - 400k
    Remaining mortgage = £319.507.70

    She put in a deposit at the time of £26k together with my deposit of £10k.

    To complicate matters, we had various pieces of work carried out on the house over a 3 month period: plastering, rewiring and flooring. The total for these works comes to £6203.46. All of these expenses were paid for using my ex partnerís credit card, with me transferring money to her at the end of each month. There is still some outstanding that I need to repay her (I ceased payments whilst we are negotiating the house buyout as I am not aware currently of all the costs it may incur). She is now trying to claim interest on this money whereas I claim, as an informal arrangement between two partners at the time, there was no interest rate specified and I should not be held to one now.


    She is demanding a buyout sum based on a £390k valuation. We bought the property back in March of this year for £360k, and similar properties on the same road go for ~£360 - £380k.

    We managed to secure our property for £360k (it was on the market at £380 - 400k) due to the survey highlighting several serious issues, namely the wiring being ancient and the roof / loft area needing repairs / replacement soon.

    We took care of the wiring straight away, but the roof and loft still need attention. Because of this I feel the property wonít shift at the valuation sheís basing her figures on.

    My question then is threefold:

    - Is the formula correct? Value minus remaining mortgage, divided pro-rata?
    - Am I right to take into consideration the outstanding work required to the roof and loft?
    - Am I right to refuse any interest payments she is claiming on shared expenses?

    Iíve read a bunch of threads here from similar posters so apologies if this is going over old ground, Iím not particularly savvy with figures so just want some impartial advice re. the above.

    Thanks for reading and for any help, much appreciated.
Page 2
    • getmore4less
    • By getmore4less 28th Nov 17, 6:35 AM
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    getmore4less
    OK get what you were trying to say and amounts to the same thing when you separate the components to the share they each bought.

    Needs some additional wording to allow for unequal overpayments.
    • bowlhead99
    • By bowlhead99 28th Nov 17, 10:18 AM
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    bowlhead99
    that's not how proper equity shares work.
    Originally posted by getmore4less
    how proper equity based shares work.
    Originally posted by getmore4less
    The proper equity split is £172:£188 or 47.8%:52.2%

    Another way to look at it is...
    on the simplified numbers for the ex wants and proper equity I got these 2 answers.
    Originally posted by getmore4less
    That is not how proper equity split works.
    Originally posted by getmore4less
    To be honest I think you are making a bit of a fuss over your "that's not how proper equity works" as if you have a copyright over what is the proper way to do things.

    If they are holding the property as anything other than tenants in common in equal shares beneficially 50:50 they will have agreed in what proportions the equity ownership is to be split and how it is intended to be funded, simple as that. That gives the 'proper' split and it is laughable that this wouldn't have been discussed on hundreds of thousands of pounds of house and debt commitments. It may just be that the OP can't remember what they put on the paperwork or that he wasn't bothered about it at the time, because he was just going to pay 'what he could when he could' each month like he previously did with the living expenses, and hope it all worked out in the end.

    OP mentions in post #4 that "Re. the deposit, yeah that wasn’t 60/40 but she decided that the mortgage itself would be shared 60/40, even though I put less deposit in." So it sounds like what was agreed was 60:40 ongoing for mortgage servicing. Unless, as I mentioned in an earlier post, perhaps it's a misleading sentence and she didn't decide up front that the mortgage would be shared 60/40, she is just deciding now that the overall profits interest is 60/40 having done her own calculation of what she wants and reverse-engineering a percentage to fit the approximate amount of cash she wants.

    The fact that OP has paid 50:50 of the mortgage over the few months it has been running to date didn't necessarily mean the whole £324k was going to be funded equally (particularly if "she decided that the mortgage itself would be shared 60/40, even though I put less deposit in."). The fact that the bank will see them as jointly and severally liable for the mortgage in terms of chasing down defaults and underpayments does not automatically mean they have each 'bought' £162k of equity using the mortgage; the bank will chase whomever it wants if it is not paid, and it is the deed of trust between the two of them which says who is the beneficial owner of how much equity.

    It would certainly be in OP's interest to say he had funded £162k of equity by taking on half the £324k mortgage and to say therefore that the only difference is that the ex had 'bought' an extra 16/360ths of the property at the start by putting in an extra £16k over his £10k. Of course, she might see it as the OP tells us in post #4: 'the mortgage itself would be shared 60/40' and he was only paying 50:50 temporarily to equalise the fact that he could not afford 40% of the actual deposit at the time, with a view to ending up at 60:40 once the 'catch up' had been sorted.

    OP should ask for a copy of all the purchase documentation from the ex and if it is not forthcoming ask for it from the solicitor who dealt with the purchase, as presumably they haven't gone out of business in the last 9 months.

    For example it might be that they did indeed do a deed of trust and put in a clause to 'protect' her extra £16k deposit as a cash nominal amount in case of eventual negative equity, as an alternative to it buying her a greater equity share. Which would again be better for OP. Or perhaps the extra £16k at the start is effectively seen as a loan from one to the other to allow them to practically purchase the property and own it and maintain it and service the mortgage together without seeing that £16k as skewing ownership.

    If OP is frustrated and half thinks it's better to just throw money at her to make the problem go away, he will not get to the bottom of what (if any) documentation there is showing that the property was to be held as anything other than tenants in common in equal shares. Putting a bit extra at deposit time, or making overpayments of the mortgage along the way, may not necessarily buy equity points pound for pound.
    • G_M
    • By G_M 28th Nov 17, 10:50 AM
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    G_M
    Well plenty of maths in posts above, and suggestions on how the calculattions hould be made.

    So I'm just going to make 2 comments for the future as you seem to be rushing into a similar commitment with someone else:

    1) get a solicitor to draw up a Deed of Trust this time stating who owns what %, and, ideally, what formular will be used in even of a sale or buy-out. The fact it your brother this time, not a partner, makes no difference!

    2) be more assertive. Several of your posts say things like :
    "She is demanding a buyout sum based on"
    "was her idea she has all the documents"
    "This was my ex partner who suggested ..."
    "it was her suggestion that..."

    It's time for you to be making some definitive statements to her.
    Last edited by G_M; 28-11-2017 at 10:55 AM.
    • getmore4less
    • By getmore4less 28th Nov 17, 10:51 AM
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    getmore4less
    it is proper in the sense that it is the only method that work for all combination of cash and debt servicing as if cash had been used.

    People can agree what they like but all the others have flaws, the most common one get your deposits back favours one party when prices rise and the other when prices drop, it is effectively just an interest free loan of 1/2 the difference.


    wonder if the OP has learnt their lesson and is drawing up an agreement with his brother that cover the finances and all the triggers for future sale, buyouts etc.

    wonder if the brother already own property?
    • purdyoaten2
    • By purdyoaten2 28th Nov 17, 11:17 AM
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    purdyoaten2
    Many have offered detailed formulae and calculations but, at the end of the day, it comes down to negotiation. Is it the case that she will accept (£390000-c£320000) x 60% plus whatever is owed to her in respect of the building work? This would be £42000 plus the outstanding amount - there does not seem to much variation.

    If that is the case I would accept. You could be wrangling over very small amounts (with associated legal costs) when the most important thing is to be able to move on!
    purdyoaten lost his password
    • bowlhead99
    • By bowlhead99 28th Nov 17, 11:33 AM
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    bowlhead99

    People can agree what they like but all the others have flaws,
    Originally posted by getmore4less
    If you do it based on mortgage 'taken on' rather than mortgage 'funded' you can end up with a situation where for example one person puts in 10% deposit and they both halve a 90% mortgage, so it is a 55/45 split in terms of committed equity, but actually (assuming you're in the first few years of a 25 year mortgage term) the second person has not put in anything like as much as 45% of overall capital to the project, being massively more 'geared' to house price rises than the other person. Again it 'favours one party' significantly in terms of profits and losses as one person can make 100x returns when the house doubles over a couple of years while the other can't, and if there is a loss it is more heavily felt by the person that did the parties a favour and fronted the deposit money.

    So, rather than 'all the others have flaws', it's clear that from a commercial and personal economics perspective your 'proper' way of doing it can have some significant practical weaknesses as well as benefits, which is why of course, 'people can agree what they like'.

    the most common one get your deposits back favours one party when prices rise and the other when prices drop, it is effectively just an interest free loan of 1/2 the difference.
    Yes, unless you apply an interest rate-type multiplier to it which stops it being an interest free loan, and you can have some ratchet arrangement on value increase or decreases, or any number of other methods. There are all sorts of ways to skin a cat.

    wonder if the OP has learnt their lesson and is drawing up an agreement with his brother that cover the finances and all the triggers for future sale, buyouts etc.
    Let's hope

    wonder if the brother already own property?
    If so and if it's not a BTL it certainly makes the mortgage trickier but he mentions having an AIP. There could of course be the extra level of stamp duty to pay but again that's a point of negotiation: "yeah, £390k might be open market value but you want to avoid estate agency fees and you want to get your exit money ASAP, and this buyer (brother) doesn't have as much as £390k because he needs to cover the extra stamp duty so we are only going to pay £390k less X, if you think that's too low then buy me out at that price..."

    Maybe the brother is first time buyer and gets free government cash via his HTB ISA so using him gets you more money rather than less!
    • getmore4less
    • By getmore4less 28th Nov 17, 12:25 PM
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    getmore4less
    If you do it based on mortgage 'taken on' rather than mortgage 'funded' you can end up with a situation where for example one person puts in 10% deposit and they both halve a 90% mortgage, so it is a 55/45 split in terms of committed equity, but actually (assuming you're in the first few years of a 25 year mortgage term) the second person has not put in anything like as much as 45% of overall capital to the project, being massively more 'geared' to house price rises than the other person. Again it 'favours one party' significantly in terms of profits and losses as one person can make 100x returns when the house doubles over a couple of years while the other can't, and if there is a loss it is more heavily felt by the person that did the parties a favour and fronted the deposit money.
    Originally posted by bowlhead99
    Come with cash or cash you borrowed the ownership and outcome should be the same.

    Servicing a debt is as good as paying with cash.


    The person that owns the most should reap more of the reward and cover more of any losses.

    that's what makes it fare it always stays in proportion to the ownership.

    What you do with your bit of the debt is totally separate from the ownership of the property


    In the 10% example there is a simple way to balance ownership back to 50:50 if that is what is desired you just split the debt 44.44%:55.56%
    • TheAbidingDude
    • By TheAbidingDude 28th Nov 17, 2:15 PM
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    TheAbidingDude
    Thanks for the responses all - I'll take the advice on and be sure to arrange an agreement with my brother!

    I'll also start paying back the ex for the expenses.

    One further question if I may: I wasn't aware of stamp duty being needed again for this transfer, but it sounds like it may? Having just spoken to someone at the bank, they said they didn't *think* it would need to be paid again but weren't sure, advising me to raise it with the mortgage adviser.

    Can anyone give me a definitive answer? Stamp duty could be a deal breaker, tbh.

    Thanks again
    • Pixie5740
    • By Pixie5740 28th Nov 17, 2:19 PM
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    Pixie5740
    If there is a consideration (ie money) being paid to your ex in order to buy her out then it will be liable for SDLT. Now it could be that the SDLT liability is £0 but it could be higher. It depends on how much the consideration is and whether your brother already owns any other residential properties.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • TheAbidingDude
    • By TheAbidingDude 28th Nov 17, 2:52 PM
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    TheAbidingDude
    Thanks - my brother does not own any other property.

    Guess I'll only find out during the meeting at the bank.
    • Pixie5740
    • By Pixie5740 28th Nov 17, 2:56 PM
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    Pixie5740
    Thanks - my brother does not own any other property.

    Guess I'll only find out during the meeting at the bank.
    Originally posted by TheAbidingDude
    Has he ever owned a property?
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • TheAbidingDude
    • By TheAbidingDude 28th Nov 17, 3:37 PM
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    TheAbidingDude
    No, he has never owned a property.
    • Pixie5740
    • By Pixie5740 28th Nov 17, 3:43 PM
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    Pixie5740
    No, he has never owned a property.
    Originally posted by TheAbidingDude
    Then if/when he ever comes to buy his own home he will not only lose out on the SDLT relief for first time buyers but will also face the higher rate of SDLT for the purchase of additional residential properties. Becoming a property owner will also exclude him from government schemes such as the LISA bonus for home buyers under 40 and HTB Equity Loan and shared ownership. It is imperative that your brother seeks independent legal advice so that he fully understands what it is he is committing to.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • getmore4less
    • By getmore4less 28th Nov 17, 4:06 PM
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    getmore4less
    If you want to challenge the ex on numbers you need a far more robust attitude to this, with solid numbers to counter theirs.

    You really need some numbers that you can go to the bank with.

    As it stands you seem to be broke the ex needs in the region of £45k on top of the £320k mortgage.

    365k is 95% LTV. What's the brother bringing to the party to get that down
    • getmore4less
    • By getmore4less 28th Nov 17, 4:07 PM
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    getmore4less
    Is the brother moving in?
    • bowlhead99
    • By bowlhead99 28th Nov 17, 7:26 PM
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    bowlhead99
    To be fair the question is "what is the fair amount to pay to buy her out ?"...

    Not "how do I and my brother afford to pay it?"
    • G_M
    • By G_M 28th Nov 17, 8:22 PM
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    G_M
    And I doubt either the bank, or financial advisor, are the best source of advice on SDLT.

    Either a conveyancing solicitor, or the HMRC website or helpline.
    • Pixie5740
    • By Pixie5740 28th Nov 17, 8:25 PM
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    Pixie5740
    To be fair the question is "what is the fair amount to pay to buy her out ?"...

    Not "how do I and my brother afford to pay it?"
    Originally posted by bowlhead99
    To be fair to whom? The OP said that SDLT could be a dealbreaker. I just pointed out that the SDLT could have further reaching consequences, especially for the brother, than just having to pay it on this transaction.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • getmore4less
    • By getmore4less 29th Nov 17, 4:54 AM
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    getmore4less
    To be fair the question is "what is the fair amount to pay to buy her out ?"...

    Not "how do I and my brother afford to pay it?"
    Originally posted by bowlhead99
    They are linked, if the amount they can raise means for them the value has to be lower than £390k then that needs to be used for the buyout calculations as that will be their best offer.

    if either believe they can get more out of it by selling as someone else will pay more then that's what may have to happen.
    • Lysimache
    • By Lysimache 1st Dec 17, 7:37 PM
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    Lysimache
    Any mortgage on the property = need to pay stamp duty on the mortgaged amount (I think - may be wrong). Check out chargeable consideration.
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