Shared Home Ownership with Partner

sjh1978

Hello,

Will try and keep it simple!

My partner and I curently live in a flat that I own. We want to buy a house in the new year, which will involve me selling my flat, which will release a fair bit of equity. Luckily, I will also be getting some cash from the Bank of Dad!

My partner will not be able to contribute much in the way of cash up front, but we both want to make sure that we are both protected should anything go wrong and we break up! Hopefully a sensible thing to think about rather than pessimistic!

Is there a model that I can use to work out what percentage ownership she can obtain yearly based on additional 'rent' to me?

Hopefully this makes sense, but if anyone can help, but needs further details, I can expand a bit more.

Thanks

S.

TheBex

Brilliant question, I'm in the same situation but as the one with no brass! Been thinking of building a calculator in excel or something, but remain convinced I'll forget somethng!

PasturesNew

Give us some numbers to work with. It's all a bit airy fairy at the moment.

BitterAndTwisted

You could keep it simple and whatever you put in from the equity from your sale could buy you an agreed percentage of the house. Then you both contribute equally to the mortgage payments, improvement works etcetera. All this could be drawn up as a legally-binding agreement through a solicitor.

sjh1978

PasturesNew wrote: »

Give us some numbers to work with. It's all a bit airy fairy at the moment.

Right, house price £240,000; mortgage £180k

I will put in £40k, say she puts in £20k (max - could be nil, in which case i will cover the remaining £20k).

The way i see it, i will be responsible for two thirds of the mortgage, and her one third. (hopefuully the maths on that one is easy!).

I have a good mortgage of 1.19% at the moment with the halifax (lifetime tracker 0.69 above base), which can be transferred as part of the new mortgage) with the remaining 40k being at the halifax SVR, the monthly payment will be about £730.

One third of this is £241 - she will pay this, and me the rest. As it stands, she owns 8.34% (£20k of £240k) and is paying the proportionate bit of the mortgage.

However, as i said we both want to have it as an investment, and accordingly I would want to let her build up her stake in the house should anything happen in the future.

The problem I have is that how do I work out the proposed rate of additional payment?

If we assume a 25 year mortgage, we could say for Year 1, the price of the house is £240k (naturally). To get another 1% ownership, she would have to pay £2400 (extra £200/month).

In Year 2, she can do the same, but i would guess we would (hopefully) have to factor in a new value for hoiuse price increase. I was thinking about 3-5% each year. Does this seem right / fair? This means that in Year 2, to get an extra 1% ownership, she would have to pay £2472 (3%) or £2520 (5%).

This would be repeated over years 3-25 (or until she gets sick of me and trades me in for a younger model )

Does this all sound fair / reasonable? I know house prices can rise and fall, so does 3% or 5% sound like a reasonable average?

We would get the solicitor to ratify any such agreement on completion, as mentioned in the PP.

Sorry if that rambled on a bit, but any thoughts?

Cheers

S.

Annisele

If you're going to pay 2/3 of the deposit and 2/3 of the payments, and she's going to pay 1/3 of the deposit and 1/3 of the payments, can't you just split the equity 2/3 to you and 1/3 to her?

Saying that she owns 8.34% of the house doesn't really work. What if the value falls to £230k - that means that after you've paid back the lender, you only have £50k of equity, and it wouldn't be right for her to get £19,182 (£230k x 0.0834) of that.

bristol_pilot

The only way to ensure that a partner cannot snaffle your equity is to purchase separate properties.

rilou81

Is this the only way? How long have you been together? Nosy question I know but if you are so intent on seperating finaces up and not having it as an 'us' I am just wondering if you are making the right decision buying together and you not just buying on your own and her contributing towards the mortgage.

I am 100% behind you protecting your money esp if you end up splitting, its your hard earned cash. Its just when we bought my then boyfriend stumped up all the cash for a deposit and neither of us battered an eye as it was for 'us' (we had been together 5 years then) Its 5 years later and we are married and everything is 'ours'. It was in no way the same amounts you are talking about but all the same. Id maybe re-think the buying together thing xx

sjh1978

Interesting responses - thanks for your attention.

Annisele - you are totally correct, though conversily if the property value rises, my portion of the increase will be greater than hers, as per the 'risk' we are taking on (me the greater risk?). I would stand by the statment that on the original PP she would own 8.34% of the property - what happens to the price after that is surely just representative of investment risk. Intersting point though.

bristol_pilot - sometimes the simplest plans are the best!!!:)

rilou81 - No, it is not the only way and i take your points. We have been together for 3.5 years, and are still very much in love :blushing:

It's just that clearly not all relationships last (good for you two sticking together - if you weren't sick of him after 5 years, it was clearly meant to be!) and we both have family and friends who have broken up after 2/5/10/25 years of marraige. We therfore just want to make sure that should this happen with us, howeverlong down the line, that we both are financially looked after. I also want to give her the benefit of increasing her share, and the extra cash each month will certainly help with my social fund!!

It sounds very clinical and I appeciate that it is not the most romantic arrangement. We are both very practical though, and realise that this is in our best interests should that horrible situation arise!

Cheers

S.

cte1111

I'm with annasele, the simple and fair way to do it is to own the house as tenants in common with her owning a third and you owning two thirds. Then if you decide to sell in the future then you split the equity in those proportions.

When you buy the house, your deposit has paid for 1/6, your partner's deposit has paid for 1/12 and the bank owns the remaining 9/12.

I hope it is just the way it is coming over on the internet, but it does sound a bit like you want to treat the woman you love like a lodger who is funding your social life with her 'rent' rather than your partner with whom you want to share everything.

From your calculations, you are only treating her contribution to the deposit as a hold on the house, but not her further monthly contributions which are paying a big chunk of the mortgage.

Simon11

Why don't you just keep it simple?

If you put in £60k of a £200k house for example, if you split, you get 30% of the house when you sell it. If the value of the house goes down, then you make a loss on the deposit you made, but if it goes up, then thats good.

Then why not pay equal shares of the mortage when you buy the house? So if you split up and sell and you both own 40% of the house, you would get 30%+5% share and she would get 5%?

If you don't wish to pay equal share of the mortage and do 2/3 and 1/3 as you said above, then why not still go down the 50/50 route(As you are together as a couple) and any money made after is split after you recieve your 30% deposit back?

That way you protect your intial deposit but when together as a couple everything is shared as a couple regarless of who puts more money in.

I hope it makes sense