cohabiting

Jason_Ayres

Hi, can anyone help with following ?

My girlfriend, who has recently moved in, wants to invest some of her savings into my house. The house is in my name and I have a large amount of equity in it.. We both want to ensure we are protected should we split up. We both understand living together agreements and cohabiting trusts but we are finding it difficult to come up with a satisfactory method of working out any profit/loss against her investment when we take into account the following:

If she invests her money we can easily work out the ratio of investment against property value, but since my property is at the point where it needs to significantly break the 3% stamp duty threshold, it's value is going to stay where it is for a long time, ergo no growth in her investment.. However, her investment will mean that we will now split the mortgage payments 50:50 (rather than her paying a notional monthly rent) and whilst her investment could 'reduce' the mortgage payment we will keep the payments the same, thus making over-payments..

We are trying to work out, if after a few years we were to separate and the property value is still the same, how do we calculate what percentage of her contributions against the monthly capital element of the mortgage payments (which change each month) we can fairly give her back, thus giving her her original investment back ?

In addition, if the house were to go up or down in value, how can we factor this into the equation ?

Not very romantic I know, but we've both been through the separation mill before hence....

Thanks in anticipation

G_M

First - tying yourselves together via a property investment is more complex and significant in many ways than getting married. So - are you ready to get married? If the answer is 'not yet', then don't pursue this idea further.

Your girlfriend should give you a weekly/monthly contribution just as she would if she rented a place elsewhere. You can receice up to £4K odd tax free from her as a lodger under the government rentaroom scheme.

However, if you are determined o proceed:
What is the property worth today? Get 3 valuations.
How much is she 'investing'? ie what %?
What mortgage do you have if any?
Note - if you have a mortgage you will need the Lender's permission to add her name to the property Title.
Who will pay the mortgage going forward? In what %?
If you split up in the future, what happens? You pay her back? Will you be able to afford to? You pay back her initial investment? Or a % of the value at that time? What if she has spent a smaller % on mortgage payments? What if the value has dropped?
Have you discussed running costs /maintenance? 50/50 or what?

You need to think through all future permutations, and draw up a deed - solicitor!

BitterAndTwisted

See a solicitor. Get the property valued so you know exactly what percentage of your property her investment will be buying. I think if she's buying into your property in order for her to be on the deeds you will need to remortgage in joint names.

Johnhowell

Go to a solicitor that specialises in Family law. Create a Co-habitation agreement/Deed of Trust. You need to detail every item that would be affected by the failure of the relationship - may sound bad at the start of a wonderful relationship - but I wish I had such a document. It may cost several hundreds of pounds now but could save you thousands later...

I bought into my partners home - paid her 30% of the agreed valuation. This plus half the mortgage was less than the threshold for Stamp Duty - so none due. The re-mortgage was cheaper than getting my name added to the existing mortgage - also we got a better deal. Also we limited the lock-in period to two years - luckily we did otherwise the redemption charge would have been very large indeed now as we are trying the sell up.

The HM Land Registry form TP1 was filled in as 30/70 Tenants in Common.

Get good advise...

Good luck,
John