First time buyer / tenants in common questions

grifferz

Hello,

My girlfriend and I are thinking of buying property together soon. We're pretty level-headed people so we're wondering how it is supposed to work as joint buyers.

The complicated thing is, she has a larger amount of money to offer as deposit than me, but a tiny salary, whereas I have more salary.

Let's assume she has £80k savings, I have £20k savings, and we want to buy a £250k property.

Now, as far as I understand it if we just went and got a mortgage in both our names that would be a mortgage for £150k jointly liable. However I'd be the one paying the mortgage as I'm the one with the income, and without any other agreement we'd each have 50% of the equity. If something happened and we were forced to sell, we'd each get half of the selling price.

At first that is clearly highly biased towards me since I'd only be putting in £20k (8%). Over time it would become biased towards her since I'd be putting in more and more mortgage payments, with the extreme case being I'd paid off all the mortgage ending up with 50% even though that would be £170k (60%).

How is this normally "made fair"? In this context I consider "fair" to mean each person owns a share of the property based on how much they have actually put in both as deposit and mortgage payments.

Is it possible to get a mortgage each, e.g. she gets a mortgage for £45k and I get a mortgage for £105k?

Just wondering how people normally do this really!

Thanks,
Andy

kingstreet

grifferz wrote: »

Is it possible to get a mortgage each, e.g. she gets a mortgage for £45k and I get a mortgage for £105k

No. You can only take a joint mortgage for the full amount you need.

You might want to think about a deed which deals with the various scenarios. Who gets what in the event of splitting up;-

- with a profit
- with a loss.

I assume you want the deceased's share to pass to the survivor on death, so write the purchase as a joint tenancy anyway?

There's a similar thread on the HBR&S board.

Rafter

Andy,

The tenancy rules are more about what would happen if something happens to one of you. Would the other get the house or would the house need to be sold and a percentage go to yours or her family?

As for the issue of the mortgage payment and deposit issue, you need to agree a formula that is fair to your both.

Your girlfriend will be foregoing more interest on her savings and taking greater risk that if property prices fall, she won't be paid out.

You are taking some risk and will be building up equity as the mortgage is repaid and servicing the mortgaged bit of the property.

Two mortgages on the same property is a novel idea, but can't see a bank going for it - too much risk versus both of you being jointly liable.

Suggest you try and keep it level headed and simple as you suggest and say that after 10 years you will be at 50/50 with a sliding scale in between. She will be giving you 3% of the equity each year in return for living 'rent free' with you paying the bulk of the mortgage. Your solicitor should be able to draw up a simple agreement for you both.

Good luck

R.

kingstreet

Other similar thread here;-

https://forums.moneysavingexpert.com/discussion/3500455

grifferz

Thanks kingstreet, Rafter. The HB&R thread indeed is very similar, and the responses there very useful.

It's a shame that you can't do a mortgage each because that would have allowed my other half to handle her own overpayments. With a single mortgage between us that makes it very much more complicated.

So, we need to decide:

1. What should happen to the property if one of us dies
2. What should happen to the property if we split up

As far as #1 goes, a large amount of my girlfriend's funds were gifted to her by her father over the course of her life and so she feels that if she dies she has a duty to pass that back to him. Since she would not just want her share to pass to me, I think that means tenants in common.

Additional complications will be that our mortgage payments will be very unequal, simply because she can't afford to match what I can afford. Yet we can't scale it back because we want a decent property.

So, do we just need to see a solicitor to discuss possibilities when coming to a fair agreement on what happens if we split up? If so, would we need to see a particular kind of solicitor, or should any solicitor be able to advise on this?

Thanks!
Andy