Buying house together - but unequal deposit

heroicnich

Hi there,

I would really appreciate some advice from the very knowledgeable people who frequent this board... I decided to post after reading about the guy buying a house, and worrying about his GF having a share, after not paying anything.

Me & my OH (due to get hitched mid-2007) are buying a house, but putting in unequal amounts of deposit (praise be to the parents who are helping us out with it). We will be splitting the mortgage payments 50/50, and all other housing costs - and we already have a joint bank account, into which we pay set (equal) amounts for bills.

My question is, what's the best way of dealing with the deposit issue? Originally, the idea was that when we sell the house, we would each take back the original deposit amounts each, then split the rest of the equity equally... but now it looks like we might just have an agreement that the difference between deposits will be paid to the other (so we have both put the same amount of deposit in). Does anyone have any advice? And ideally we would like to avoid paying any more money to solicitors (I don't get on very well with our conveyancer at the moment, LOL) so is there any advice on drawing up a document that might not be exactly legally enforceable, but which might be referred to if there was any disagreement? AND (!) any thoughts on the best for tax purposes?

Thanks for your help, Nich

Heth_2

My husband and i are trying to buy a house together, and our deposit is made up of savings together, separately and gifts from parents. We are considering it all our money though, and our money in the joint account going towards the house running.
I guess there could be issues if we split up soon, with just over half of our deposit being inherited from his family, but we aren't planning to do anything about it.

Bossyboots

You can have a deed drawn up and this should be done by a solicitor experienced in doing them. It is unlikely your conveyancer will do it although they are becoming more common and some of them will. This would be legally enforceable and should state how the deposit is to be split.

The other alternative is an agreement between you and the parents that they will be repaid the amounts they have loaned if you split up. It is very important for them as well, if the money is just a loan, to make sure that this is encompassed in a binding agreement.

To save on costs, decide exactly what you want to do before going to a solicitor. Present them with all the names and figures involved so all they have to do is incorporate it into a document. It will only get pricey if you want something to the detriment of another as then more detailed advice is involved but I can't see that is going to be the case here so it hopefully won't cost you too much. You should make sure someone independent witnesses the signatures on the deed as well, making sure their name is also printed clearly so there is no issue later on about what someone's signature is supposed to say.

devils_advocate

Two ways of doing it.

Assume that the house is 200k, with total deposit 30k. A put in 19k, B put in 11k.

Method 1 - split between mortgage and deposit when house is sold. so 170/200ths of sale proceeds are split equally, as this represents the equal contribution to the mortgage. 19/200ths goes to person A, and 11/200ths goes to B.

Method 2 - use some form of idexation like BoE base rates (fiddly calculation) or RPI (easier calculation). give this notional interest to the two proportions iof the deposit, and then take the deposit plus notional interest from the sale proceeds. the remainder is then split 50-50.

I would favour method 1, as I beleive that house prices will fall over the next few years. Any decrease in price comes straight out of the deposit, as the mortgage has to be repaid anyway. As the person with the bigger deposit has more to lose, they should have the chance of a larger gain if prices rise.

I believe (though am open to legal contradiction) that a letter signed by both of you outlining the scheme would be sufficient to show your current intentions later. A copy should be kept by both people.

heroicnich

Thanks for all the advice. The parental input is a gift, so we don't have to worry about that. I think we will draw up a document between us, sign it and have it independently witnessed so that we can refer to it. With us getting married next year, we are trying to make sure that we respect the fact that we are putting in differing amounts without getting too stuck on it (what with us planning to spend the rest of our lives together!).

Dora_the_Explorer_5

Me & my OH (due to get hitched mid-2007) are buying a house, but putting in unequal amounts of deposit (

Originally, the idea was that when we sell the house, we would each take back the original deposit amounts each, then split the rest of the equity equally... but now it looks like we might just have an agreement that the difference between deposits will be paid to the other (so we have both put the same amount of deposit in).

Why would you want to split things between you if you're getting married?

If it comes to differences between what each of you contribute will you be splitting the cooking, cleaning and housework 50/50? Will you keep a tally of how much time you each contribute to the household? How will you cost that?

Please forgive me if I've misunderstood, but what you are describing reads like a business relationship involving property, rather than a loving relationship involving making a home together.

heroicnich

Hi Dora

What can I say... the day we announced our engagement, my parents announced their divorce... and my OH parents are currently also living apart. So I don't think it is fair to say that we are conducting a business transaction, but understandably, although we are planning a life together, we are also trying to respect the fact that we a) are really lucky to have parents who can help us buy, and b) are able to contribute differing amounts to the deposit (OH is one of 6 - I am one of 3 (for my dad) and one of one for my mum!).

As the amounts are quite markedly different (OK, I'm putting in more than twice what he is), it seems sensible to try and establish the best way of setting it down. If the unthinkable happens, and we split up, neither of us want to be arguing about money. And as some of my deposit comes from my mum, she is anxious (given her situation) that I get some security from that.

In my eyes, carefully considering the legal implications of this situation is just like making a will - you don't want to think about it, but a little thought now might prevent heartache in the long run.

heroicnich

Dora_the_Explorer wrote:

If it comes to differences between what each of you contribute will you be splitting the cooking, cleaning and housework 50/50? Will you keep a tally of how much time you each contribute to the household? How will you cost that?

BTW, as we both work full time, we will both be making a 50/50 contribution to the household, both in terms of DIY, gardening and cooking, cleaning etc. As and when things change (i.e. kids) then we'll deal with that!

Debt_Free_Chick

heroicnich wrote:

Thanks for all the advice. The parental input is a gift, so we don't have to worry about that. I think we will draw up a document between us, sign it and have it independently witnessed so that we can refer to it. With us getting married next year, we are trying to make sure that we respect the fact that we are putting in differing amounts without getting too stuck on it (what with us planning to spend the rest of our lives together!).

hhmmmmm..... but I think that if the solicitor did the agreement the split would end up on the deeds somewhere. What do others think?

Another suggestion if you want to even out the deposit ..... the one putting in the lower deposit contributes more to the mortgage, until the difference is made up. Let's say the deposit is £30k, you're putting in £20k and your OH £10,000. Effectively, she "owes" you £5k. She could pay this back to you over, say, 2 years by contributing an extra £208.33 per month to the mortgage. You reduce your payment to the mortgage by the same amount. After 2 years, your deposit is evened out and you then go on to splitting the mortgage payments 50/50. No allowance here for loss of interest on the extra £5k you contributed so you'll need to adjust for that, if you want some payment for loss of interest.

Regards

Dora_the_Explorer_5

Hero, I truly do understand why you both need to be sensible - just make sure it doesn't become a self-fulfilling prophecy and making things easy if you split doesn't make splitting the first thing you do at the first hurdle you hit.
As far as the financial split goes, it might be an idea to think of things in percentages rather than amounts, then if the worst comes to the worst you''ll both bear the gain or loss equally.
To be very pragmatic about it, you may want to consider being tenants in common rather than joint tenants and also perhaps give some thought to what the view of the judge in a divorce court might be.

zag2me

I would get an agreement drawn up between you. As long as you are honest and both agree it shouldnt be a problem.