Joint mortgage advice

mickayfinn

Hi folks, I'm looking for some advice or potential pitfalls in the plan I have to get on the property ladder with my girlfriend. Currently I have no debt and work full time, but also have no savings. She already owns her flat and has just made a £40k profit from selling it, which she wants to put into a bigger property for us.

Plan is:
She puts down a 40k deposit
We take on a joint mortgage and split the payments equally.
In the event we split up and the property would be sold, her 40k would come back to her and after the mortgage was paid off, we would split any money made on the property.

Does that sound feasible? I don't know anything about mortgages and am bamboozled by it all. I am keen to get on the property ladder, but have no deposit to put down.

Am I missing some glaring pitfall here? Advice appreciated.

benjaminM

Hi

All what you said sounds feasible. To make it legal you need to see a solicitor and set up a deed of trust. That way everything is agreed before any potential falling out.

mickayfinn

I'm aware that she is obviously the main stakeholder in the property. So if we split up and she didn't want to sell, would she just pay me the amount I'd already put into the mortgage? Sorry if these are stupid questions. I'm not too good with this kind of thing.

We are getting something official drawn up next week

TrickyDicky

Theres 2 ways of owning a house:

Join tennants - you each own 50% of the house
Tennants in common - you can designate what % of the house each person owns.

The second option might be the easiest way forward. just give her whatever percentaget the 40k covers + half of the rest. Then if the house price increases you both have increases in value of your assets.

magpiecottage

What is not changed by this is that you will be jointly and severally liable for the mortgage.

That means if you split up the lender can chase either of you for the entire amount - not just your "share".

I say this not to be negative but so that you are aware of what you might be letting yourself in form. We see too many posts where people have found this out after they have split up and are in a horrible mess.

VKay

Hello,
Ask your solicitor to draw up a declaration of trust. This will outline that your girlfriend has put in 40k and the rest of the house is 50/50.
This may cost you £100 or so but is worth doing to clarify your finances.

Caz3121

mickayfinn wrote: »

I'm aware that she is obviously the main stakeholder in the property. So if we split up and she didn't want to sell, would she just pay me the amount I'd already put into the mortgage?

bear in mind most of the mortgage is mainly interest so what you would be looking for is your share of the equity over and above the £40k...so if the property is bought for £180k (£40k deposit + £140k mortgage) and is then worth £200k...you take off the £40k + the outstanding mortgage..which may be £135k and split the rest 50/50

you also need to agree what happens if the property was to be worth less than paid for...same numbers above but property now worth £160....so after repaing the mortgage there is only £25k left...does she get that and you owe her £15k?

Unfortunately it has happened recently where people have separated with negative equity and end up with loans to pay it off

getmore4less

TrickyDicky wrote: »

Join tennants - you each own 50% of the house

Actualy in practice you both own 100% of the house, so if one of you dies the other owns the lot.

getmore4less

If she has £40k on an in/out basis with the mortgage 50:50 then you lose if prices drop and she loses if prices rise.

She is in effect giving you a £20k interest free loan repayable on demand(sale) is that what you both want to agree to?

If you want to do 50:50 properly you take on a bigger proportion of the mortgage

eg if the total purchase costs are £200k and you don't pay any of the costs/deposit.

£40k OH £160k mortgage

You have £100k OH has £60k so mortgage is split 100:60

when you sell you get 50% of the proceeds each(before paying off the mortgage debt)

THEN you pay off the mortgage debt in the 100:60 proportion.

getmore4less

mickayfinn wrote: »

I'm aware that she is obviously the main stakeholder in the property. So if we split up and she didn't want to sell, would she just pay me the amount I'd already put into the mortgage? Sorry if these are stupid questions. I'm not too good with this kind of thing.

We are getting something official drawn up next week

NO

If the house price drops you will owe her if she is to buy you out.

Be carefull judging by the number that come on here, with agreement that don't work for many senarios, many solicitors don't have a clue how to do equitablel agreements.

CLAPTON

the 'fair' way of doing it is as follows

lets say you pay 200,000 for the house
she puts in 40,000
and you share 160,000 i.e 80k each
with of course a mortgage of 160k

so her share is (40k+80k)/200k = 60%
yours is 80k/200k = 40 %

so lets suppose the house rises to 300k with a mortgage reduced to 150k

she 'owns' 60% of 300k ie 180k less half mortgage 75k = 105k
you own 40% of 300k i.e. 120k less half mortgage 75k = 45k
both make a nice and fiar profit

or lets say property drops to 180k with mortgage of 150k
she owns 60% of 180k = 108k less 75k = 23k i.e. loses 17k
you own 40% of 180k = 72k less 75k = -3k i.e. you lose and owe 3k
she loses more than you but then she stood to gain more than you


fair both ways