tenants in common calculation help please

fraser

just working out what our % split will be for tenants in common - hoping someone can confirm the numbers are right? and how to account for the portion after deposit and costs?

fictional figures used

---

house - 400k

deposit - 100k from me, 0 from partner

mortgage - 300k

I am putting all the deposit and costs (stamp duty @ 3% = 12k and 2k for solictors and mort costs)

so me = 100k + 14k in

partner = 0 in

mortgage = 150k each

so total costs and deposits and liability would be = £414k split share would be

me = 114k + 150k = 264k = 64%
partner = 150k = 36%

then partner will be paying 33% of monthly mortgage payment, me the remainder will be met by me, this becomes more complex - should I just record is as 1/3 and 2/3's on the 300k ? or just split as 50% each as above?

thanks

mummytofour

Call me old fashioned but there was a time when couples ( am I right in assuming your a couple?) pooled their finances together or even added up all the household bills and paid these on a equal % of income, larger income pays more.

Not judging, just mentioning.

fraser

well my partner and I have discussed this and both wanted to record the path of monies

we both come from divorced parent homes and know the reality of life so looking to be as transparent as possible

Annisele

fraser wrote: »

so total costs and deposits and liability would be = £414k split share would be

me = 114k + 150k = 264k = 64%
partner = 150k = 36%

then partner will be paying 33% of monthly mortgage payment, me the remainder will be met by me, this becomes more complex - should I just record is as 1/3 and 2/3's on the 300k ? or just split as 50% each as above?

This isn't something that has "right" figures - it's up to you and your partner to agree between yourselves something that you think is fair. It's quite OK to decide on an equity split that doesn't match the amounts you're both putting in.

If it's something that's going to bother the pair of you, it might be easier to have your partner pay 36% of the monthly mortgage payment, then just stick at their share being 36%. Alternatively (and I think the way I'd do it) is that you say your partner owns 1/3 and you own 2/3, and not quibble over 3%.

getmore4less

fraser wrote: »

just working out what our % split will be for tenants in common - hoping someone can confirm the numbers are right? and how to account for the portion after deposit and costs?

fictional figures used

---

house - 400k

deposit - 100k from me, 0 from partner

mortgage - 300k

I am putting all the deposit and costs (stamp duty @ 3% = 12k and 2k for solictors and mort costs)

so me = 100k + 14k in

partner = 0 in

mortgage = 150k each

so total costs and deposits and liability would be = £414k split share would be

me = 114k + 150k = 264k = 64%
partner = 150k = 36%

then partner will be paying 33% of monthly mortgage payment, me the remainder will be met by me, this becomes more complex - should I just record is as 1/3 and 2/3's on the 300k ? or just split as 50% each as above?

thanks

Thats not quite right, what is in red is wrong.

The way to think of it is to decide who is contributing what to the total cost.

So you have

£114k you
£0k OH

Decide how you are splitting the £300k mortgage

If you split it 50:50 then you pay £150 worth each

Then you own £264k OH £150k

Now this is the starting % of ownership

When you come to split(if) or dish out the dosh you split the house on these % and pay of 50% of the outstanding mortgage each(mortgage After the shares not before that is the mistake most people make).

What might be better is to go 50:50 on the actual house, it makes it easer if you do stuff to the house because you just share the costs 50:50.

To do that you have to split the £416k to contibute £208k each.

So the OH pays 208k worth of mortgage and you pay (208-114) £94k worth.( the mortgage sorts itself out and again you split the proceeds from a sale BEFORE paying of the shares of the mortgage


Remember with the deposits and a share of the mortgage buys a variable value asset.


Keep the runing costs seperate and split those differntly if you want.

We did the house 50:50 but the higher earner tended to contibute more to the shared living costs, especaly holidays and running more expensive car(both shared).

Richard_Webster

I would say that the actual payments on the mortgage should be taken into account not the proportion of the total mortgage debt. Say the monthly payment is £1000.

On OP's example. He has put in £114K. If partner paying 1/3rd mortgage then after 3 months partners has put in £1000 and OP £114,000 + £2000 = £1i6,000 so equity should be shared 116:1 if they split after 3 months because partner has only put that much in.

I recommend that in a situation like this they keep records and sign something every 2-3 moths to record the up to date position.

E.g after 10 years of paying £1,000 a month the mortgage payments are £80K for Op and £40K for partner so proportion is £114K + £80K = £194K for OP and £40K for partner so proportion has become 194:40.

DVardysShadow

Richard_Webster wrote: »

I would say that the actual payments on the mortgage should be taken into account not the proportion of the total mortgage debt. Say the monthly payment is £1000.

On OP's example. He has put in £114K. If partner paying 1/3rd mortgage then after 3 months partners has put in £1000 and OP £114,000 + £2000 = £1i6,000 so equity should be shared 116:1 if they split after 3 months because partner has only put that much in.

I recommend that in a situation like this they keep records and sign something every 2-3 moths to record the up to date position.

E.g after 10 years of paying £1,000 a month the mortgage payments are £80K for Op and £40K for partner so proportion is £114K + £80K = £194K for OP and £40K for partner so proportion has become 194:40.

I disagree with this.

Over time, it dilutes the equity brought in to the deal, as mortgage interest overtakes the original equity.

Edited to add: The initial equity is essential to it being possible to make a deal to buy a property. Without it, there is no mortgage. So, whoever brings initial equity, it should not be diluted, it should remain as a fixed percentage of the overall house value

Effectively the mortgage is renting capital. But bringing equity of your own reduces the requirement to rent capital. If you know at the outset how the mortgage is to be split, then you know how much equity you are bringing in and how much you are renting and you base the shares on that.

Hippychick

What about agreeing that if the house is sold you get the first 114k after mortgage, ea fees etc, then if there is any additional equity that gets split 50/50 or whatever % you decide.

Will your partner contribute in other ways towards the household? ie, maintenance costs etc. What will happen if you lose your job and your partner has to pay the mortgage, will you want your equity back? What happens if you have a baby and the other person stays home to look after it? would that person be deemed as not contributing?

Are you married? do you have children together? these additional factors should be taken into consideration.

I think you should seek legal advice and have a trust deed drawn up.

Personally we registered everything 50/50 even though I put in a substantial deposit and paid the fees etc, however I am married and consider whats mine is my husbands and vice versa.