help with who owns what percentage of house

kevineaton77

hello i hope you are well.

not sure if this is the correct place to post this so please forgive me if its not. this is a bit of a ramble as well so bear with me.

me and my girlfriend have a mortgage. i have some spare cash that is doing nothing in the bank. we are currently on an svr at 3.5%, with no tie ins or penalties for moving or paying off lump sums.

house is worth 245k as a good estimate - we had a realistic sales prices of between 235 and 245 a few months ago

mortgage is currently 188k, we bought for 192k we have so far paid off 2k each off the mortgage... so its still owned 50/50 by us.

i want to put circa 30k in to get the LTV to 65% so we can get a good rate (looking at 2 year tracker with first direct, 2.29%, £195 arrangement fee...if theres better out there please tell me!)

i'll be honest, we nearly split up a while back and nearly sold the house but we got over it. it was easy to work out who got what from the house equity as we had both paid in the same amount - we were going to get about 24k each out of the equity. i know this isnt very romantic, but well, things happen.....problem is, we cant figure out if i put in 30k what would happen if we split in the future.

so we have a couple of questions:
if i put in 30k and then at some point in the future we split:

1)how do we work out who gets what if the house goes up/down/stays the same in value

2) how would we get this officially stated - would we need to go and see a lawyer or can we draw up something ourselves.?

hope you can help!

GMS

If you are currently 'joint tenants' you could amend this to 'tenants in common' which would allow you to define who owns what share.

Severing joint tenancy is pretty simple. Speak to a solicitor to sort it out.

kevineaton77

thanks for that, much appreciated. i'll look into it.

any ideas how it would actually work though?

given the figures i put down and if the house was worth say £250k if we ever split, how would we work out who gets what?

Chinkle

There are a number of ways to skin a cat, as there are answers to your question. You could just say you get your 30k back along with a 50% share of whatever equity there was - simples. However, by the sounds of it you would prefer to establish a way of recognising the extra benefit you are bringing to the table by reducing your LTV and therefore improving your mortgage package and monthly repayments. So you need to work out what % of the property you are 'buying out' so that you are compensated by the same % if/when you decided to go separate ways. Another alternative would be to agree that your GF continues to pay the same amount as she does currently each month while you pay the difference, meaning your monthly contributions are reduced but you still split things 50/50 when you came to sell. All of this assumes that your property doesn't drop in value or go into negative equity of course.

Its really about you and your GF working it out in a way that you both agree on and then getting it put officially in writing.

SAMMYE_2

If you love her I would say a fair way would be to say you get your £30k back. If she hasnt got the money to put in its not really fair for you to put that chunk in and expect her to pay the extra...

It might be a really nice romantic gesture that she is looking for.

kevineaton77

hi chinkle and sammy...thanks for your input!

unfortunately romance is put to one side - this is cold hard money and i have seen too many of my friends get into terrible trouble. best to work it out, get it agreed to and written down whilst we have rational heads not after things have gone wrong....not that im hoping things go wrong, but we nearly split about 6 months ago. as we are not married this is a very sensible thing to do for both of us.

i wouldnt make her pay more each month, we would still split the mortgage payments 50/50.

also, she benefits from the fact that she doesnt have to pay as much in each month, so im saving her about £1200 per year with the better deal we will get, plus the property is more secure if either one of us looses our jobs. its win win for us both.

We need to get the mortgage down and im the only one who has the capital to do it - what i want to do is invest my money, it needs to grow (assuming the house value increases), so simply getting the 30k back isnt an option if the worst happens - its deflating at 4.5% a year! so i had been thinking that buying out a percentage of the house would be the way forward. problem is, i cant figure out whats a fair way to calculate the gain i would make on the capital i put in.

help please!

HappyMJ

There is no fair way. That is the only answer. If you have a spare £30k and you don't just wish to have it back on sale which I would consider fair then you need to invest it on your own and keep paying the normal monthly payments. I understand you want to pay the mortgage down as you won't pay tax on the implied income but that should be shared with your girlfriend. It's up to you....

If you wish to do it your way you'll need to get an independant valuation when you purchase your £30k share from her then another independant valuation when you buy her remaining share out in the future or on sale. It's costly.

InMyDreams

Why not, completely separate from the arrangement with the house, simply lend her £15K. You can charge her whatever interest rate you (and she) agree on. You could base this on whatever you want (eg what you might get from some other safe savings account (not investment) what she might pay to borrow £15K from elsewhere, the interest rate you are paying on your mortgage, or anything else you think relevant). To keep things simple, keep this agreement completely separate from the house.

You can now both put in £15K to bring down the equity and the house remains 50:50. You have the advantage that your £15K is 'safe' from house depreciation (she will be taking on the risk as she will have to pay you back the £15K regardless of the house value) but you have to accept that if house prices rocket (unlikely any time soon) the house is still 50:50. Think of it like you are 'saving' rather than 'investing' that £15K. Hopefully you will both end up quids in if the better LTV gets you a better mortgage.

As to how she eventually pays you back that £15K, well hopefully in the event of a house sale due to split up, there will be enough equity for her to cover it (simplest option). Or she could slowly pay you back month by month (in addition to the interest she is paying you) until she's repaid it all. (This would require a bit of recalculation as the interest would also slowly go down, but it's not difficult.) Or most hopefully you will reach a point in your relationship in years to come where the £15K agreement between you becomes irrelevant and the idea of her paying you interest is as absurd as one of you paying the other to take a career break to bring up your children.

Jojo1daffy

Clearly no plans to marry which would simplify this hugely! If you don't envisage staying together why not split and buy somewhere new on your own with all your money to yourself? Sounds like you are just delaying the inevitable really.

dimbo61

I hope you work things out but if/when you do marry or have kids all bets are off!50/50 or less
Have you considered an offset mortgage ! and you then put the £30K in an offset account in your name only and she can also set up an account of her own.
You could also do the tenants in common thing via a solictor