Deed of Trust

shoe_gal_84

I'm just wondering if anyone may be able to advise me of the best way to deal with this situation.

So, my partner owns a house (£74,000 mortgage outstanding) and I pay him rent. We are now buying a house together (value £135,000). We have been able to port his mortgage across in joint names, and get an additional part of the mortgage for the extra £17,000 (inc. £1000 arrangement fee).
So, he currently has £45,000 equity in our current house which he will be transferring to use as the deposit. I want him to know that I'm not with him for his money, so am getting this Deed of Trust drawn up to protect his £45k. I don't have anything to put into the house, other than am paying half of all the fees and costs.

We have had lots of discussions about it and can't seem to agree on the best way to do it. I appreciate that we can have whatever we want written in to it, but it's just working out what that is and keeping it fair.

So far, the options we have are:
* If we split up, he will just get his £45k back and we will split any other equity 50/50
* If we split up, he will be entitled to 2/3 and I will be entitled to 1/3
He obviously prefers the second option, understandably, as that means he will be hopefully increasing his 45k share as house prices rise (appreciate they could fall too). However, we have talked about doing some major work to the house in the future (eg. loft conversion or extension) and I feel it would be unfair for me to pay 50/50 into this to only receive 1/3 of it back.

Is there another option that we are missing or can anyone else see any way around it?

Hope this makes sense, please ask if you need anymore details.

Claire

DVardysShadow

Decide the shares you want to end up with. Then divide up paying for it.

If you go 50:50, then he puts in 45000 cash and pays 22500 of the mortgage - you pay 67500 on the mortgage. If prices go down, the shortfall will affect the equity you can get out, so his 45000 is at risk. You should be prepared to pay him 50% of any shortfall.

lee636

We are in exactly the same position and same amount i am putting in, although on £250k.

We are talking about either £45k back on any sale and then 50/50 split or i hold a 65/35% majority and any split in calculated this way.

Its a sensible thing to have and a must really but still not nice trying to put it down in words (preparing in case of a split).

shoe_gal_84

Thanks Lee, it's nice to speak to someone else in the same situation. The thing is, if you agree to get £45,000 back if you split up, would you be content with that as it probably should have gone up? It's a really tricky one.

lee636

There is another side to it(as DVS said above); if the property price goes down and you hit negative equity then when you pay the mortgage off the initial investment (£45k) may not be there to take back. After all, you can’t only look at taking the initial investment without taking into account the outstanding figure.

There is no easy answer and is definitely something that needs a serious discussion over. I don’t think there's any reason that a new deed couldn’t been drawn up later on (at additional cost) if you changed your minds.