Buying House with Girlfriend - What's the best way?

squidy_the_quid

Lakey wrote: »

Squidy - I think you must be the most polite poster I have seen on the boards!!
It's such a pleasure to read your replies.
I suspect your girlfriend is a very lucky girl and I wish you both all the best in the future with whatever you decide.

:beer:

Thank you for your very kind words Lakey!

I'll be sure to mention to my GF how lucky she is

:beer:

Kynthia

Being financially sensible does not mean you aren't committed. There's a lot of debt and heartbreak out there because people thought putting things in writing was unromantic.

You sound very considerate and I hope you come up with a solution that you are both happy with. Communication and honesty about all the possibilities is key to long term happiness with the property.

Could you maybe have a deed of trust or covenant for an unequal split of the property just for a set number of years until you remortgage? Or is it possible to both pay the same deposit but use the remainder of your savings to reduce the mortgage interest in an Offset mortgage (if that's how they work)?

I wish you both well.

flissh

It is hard, but best to put romance aside when discussing stuff like this. The truth is, relationships do break down. But they evolve too.

When we first bought, my O/H had a twenty thousand deposit, I had zero. We agreed, if anything happened we would sell, he would get his deposit back, as a percentage of the property, otherwise that money would have been in a savings account earning him money, (in the days when interest was paid on savings!!)

We sold that house, moved overseas, and are now going to buy another house in the UK, but the pot has become a joint one now. He never did take the deposit back. We are a couple and share everything. I put a lot of elbow grease into turning that first house into a nice home that paid dividends when we came to sell, and that counted for something too.

getmore4less

People can agree what they like but to do it properly you should consider that you buy part of an asset with the deposit and the borrowings and that that asset changes value under you once bought.

So for example if you buy a £100k house with £7k/£3k deposits and share the mortgage 50:50 the ownership is 52:48. buy with £20k £5k deposits you own 57.5:42.5.

Going 50:50 sharing the mortgage and you get your deposits back when you sell then split the rest 50:50 is not correct allthough you can agree to this.
You also have to consider the loss situation as well and shortfalls should be in the same %ages.

If you want 50:50 equity so you can split any proceeds or shortfall on selling then you have to work it out as if you bought 1/2 the place. so pretend that you borrowed different amounts to make up yor 50%

So if you put down a smaller deposit you should pay for more of the borrowings to bring the proportion back up to 50%(Note: that if you split the extra borrowings get paid back from the 50% share, not before the share out.)

Now to work this out can be a bit complicated since you usualy have to have a single loan(mortgage). You can borrow from another source but the mortgage route is usualy cheaper.

If you can get interest only this make it easier since you can work out the split of interest very easily based on the share of the borrowings and do the capital repayments as and when to get it back to really being 50:50 adjusting the interest with each capital payment.

On a repayment mortgage this is a bit harder and needs working out , one way is to pretend the loan is in two parts the one with the bigger deposit has an I/O portion and you work out the interest on that and they pay that each month, the small deposit pays the rest and this also pays off some of the capital on the larger share, once the extra capital is paid off the mortgage then reverts to 50:50. (one of the mortgage calculators will do this for you so not that hard)

Going down the I owe you some of your excess deposit is another way but the reality is that the value of that share changes so you should pretend that you have actualy borrowed it(mortgage rate is a good one to use).

If you do agree to split unequaly at the start then any investment in the property should also be done at the same % and not 50:50.


I think that 50:50 is the way to go, make that happen, makes life a lot easier if things go wrong.

sunshine_shell

Squidy.... do what you think is right for you two, sit down and talk to your girlfriend

squidy_the_quid

LillyJ wrote: »

It is a team effort, but screwing yourself over simply to be all romantic and cushty is pointless.
I bought with my fiance (then plain old boyfriend) last year, and we got everything drawn up properly, and DID have to consider "what ifs" despite being utterly in love, together for 8 years, and completely devoted to one another. Relationships do break down, as do marriages, and it's foolish to think this will never happen. I bet most people who get divorced didn't think on their wedding day they would split up.

As it happens, we are now engaged and getting married next year. After that we will have our finances totally joint- all wages going in to one big pot.
Until then it will be separate accounts, with one joint one for all the bills which we pay equally into each month. Doesn't mean we love each other any less, it's just sensible.

I want to be with him for the rest of my life, and hope and pray that everything goes the way we dream it will - but as many people are finding out the hard way at the moment, life doesn't always give us what we want.

Thanks for replying LillyJ!

Your thoughts on this subject seem to pretty much mirror my own. I love my GF very much and I have every intention of spending the rest of my life with her, but many other couples have thought the same before me and then found out not everything works out as you plan it (married or not). Life is unpredictable and it may not be pretty to talk about but it just makes sense to plan for such occassions.

All the best with your wedding! :j

squidy_the_quid

getmore4less wrote: »

People can agree what they like but to do it properly you should consider that you buy part of an asset with the deposit and the borrowings and that that asset changes value under you once bought.

So for example if you buy a £100k house with £7k/£3k deposits and share the mortgage 50:50 the ownership is 52:48. buy with £20k £5k deposits you own 57.5:42.5.

Going 50:50 sharing the mortgage and you get your deposits back when you sell then split the rest 50:50 is not correct allthough you can agree to this.
You also have to consider the loss situation as well and shortfalls should be in the same %ages.

If you want 50:50 equity so you can split any proceeds or shortfall on selling then you have to work it out as if you bought 1/2 the place. so pretend that you borrowed different amounts to make up yor 50%

So if you put down a smaller deposit you should pay for more of the borrowings to bring the proportion back up to 50%(Note: that if you split the extra borrowings get paid back from the 50% share, not before the share out.)

Now to work this out can be a bit complicated since you usualy have to have a single loan(mortgage). You can borrow from another source but the mortgage route is usualy cheaper.

If you can get interest only this make it easier since you can work out the split of interest very easily based on the share of the borrowings and do the capital repayments as and when to get it back to really being 50:50 adjusting the interest with each capital payment.

On a repayment mortgage this is a bit harder and needs working out , one way is to pretend the loan is in two parts the one with the bigger deposit has an I/O portion and you work out the interest on that and they pay that each month, the small deposit pays the rest and this also pays off some of the capital on the larger share, once the extra capital is paid off the mortgage then reverts to 50:50. (one of the mortgage calculators will do this for you so not that hard)

Going down the I owe you some of your excess deposit is another way but the reality is that the value of that share changes so you should pretend that you have actualy borrowed it(mortgage rate is a good one to use).

If you do agree to split unequaly at the start then any investment in the property should also be done at the same % and not 50:50.


I think that 50:50 is the way to go, make that happen, makes life a lot easier if things go wrong.

Thanks, indeed you are correct!

My thoughts were to go in as in your first example. Both of us put as much down on the house as we both in the form of our deposit and then split the mortgage equally so we would have equal monthly payments (we would be getting a repayment mortgage).

e.g.
A house costs 1000
I contribute 200
My GF contributes 100

Therefore:
Total deposit is 300
Mortgage is 700
Split mortgage 50:50 so 350 each

Therefore I own:
20% (deposit) + 35% (half of mortgage) = 55%

and my GF will own:
10% (deposit) + 35% (half of mortgage) = 45%

Then if we came to sell the house we would both get back our respective percentages of the final sale price.

squidy_the_quid

sunshine_shell wrote: »

Squidy.... do what you think is right for you two, sit down and talk to your girlfriend

Thanks, we shall do!

We have already talked about it, but it's really good to get some feedback from others about how they've gone about it and how it's worked out for them. It is a big commitment, so it's best that we both go in as informed as we can be.

:beer: