Splitting up, not married, questions about fair settlement

caramelshortcake

Apologies if this is not the right place to post this question….

My partner of 11 years and I have decided to go our separate ways. We need to agree on a fair financial settlement for both of us and I would really appreciate some views on the best way forward. The details are a bit rough as I have not looked at all the paperwork yet but hopefully enough basic information for now.

We bought our house back in 2006 for £200k, with a £20k deposit. The house was bought jointly – not sure what the correct term is. The latest mortgage statement shows around £150k outstanding. Although not many sales have taken place in the area, similar house to ours in same road sold for £185k recently.

My partner recently received inheritance of around £70k. He also has ISAs and other savings which I am not sure of the value of as well as two pensions. We owe approximately £9k on credit cards, £6k of which is in my name as my credit seemed to be better over the years so I applied for balance transfers etc. (we owed £24k at the beginning of the year but we have focussed on paying it off – he won’t use his savings for this). The debt was all utilised for house improvements and household items.

My proposed way forward is that he either buys me out of the property or that we sell the house and any equity is used to pay off the debts and the remainder split equally between us. I have no interest in his inheritance or savings and I wouldn’t be entitled to it anyway, I just want to be able to move on in a way that we both feel is fair to both of us.

If he were to buy me out, how do we work out what is a fair amount? I suspect he will have difficulty taking on the mortgage by himself so if that’s the case, do we have to sell? Would you please let me have any views / comments that may help us move forward.

NewKittenHelp

So you have about £35k in equity, but £9k in debt.

I'd say that about £10,000 would be a fair amount for him to pay you, once the debt's been paid off. Though legally, he's not obliged to pay for the debt in your name, and it could be a costly legal battle to force him to pay his £1,500 share to you.

Would he be willing to pay down the mortgage, once you've been removed from it, in order to make it more affordable for him?

lazer

caramelshortcake wrote: »

Apologies if this is not the right place to post this question….

My partner of 11 years and I have decided to go our separate ways. We need to agree on a fair financial settlement for both of us and I would really appreciate some views on the best way forward. The details are a bit rough as I have not looked at all the paperwork yet but hopefully enough basic information for now.

We bought our house back in 2006 for £200k, with a £20k deposit. The house was bought jointly – not sure what the correct term is. The latest mortgage statement shows around £150k outstanding. Although not many sales have taken place in the area, similar house to ours in same road sold for £185k recently.

My partner recently received inheritance of around £70k. He also has ISAs and other savings which I am not sure of the value of as well as two pensions. We owe approximately £9k on credit cards, £6k of which is in my name as my credit seemed to be better over the years so I applied for balance transfers etc. (we owed £24k at the beginning of the year but we have focussed on paying it off – he won’t use his savings for this). The debt was all utilised for house improvements and household items.

My proposed way forward is that he either buys me out of the property or that we sell the house and any equity is used to pay off the debts and the remainder split equally between us. I have no interest in his inheritance or savings and I wouldn’t be entitled to it anyway, I just want to be able to move on in a way that we both feel is fair to both of us.

If he were to buy me out, how do we work out what is a fair amount? I suspect he will have difficulty taking on the mortgage by himself so if that’s the case, do we have to sell? Would you please let me have any views / comments that may help us move forward.

Do you both work?

Was the £20k deposit joint?

Did you both contribute equally to paying off the debt for the past year?

How did your finances work generally? Was it joint accounts or individual accounts with both of you putting an amount in to cover bills?

The answers to these are important before deciding a fair spilt, I am wondering how he has amassed savings while you as a couple have £9k in debt?

caramelshortcake

lazer wrote: »

Do you both work?

Was the £20k deposit joint?

Did you both contribute equally to paying off the debt for the past year?

How did your finances work generally? Was it joint accounts or individual accounts with both of you putting an amount in to cover bills?

The answers to these are important before deciding a fair spilt, I am wondering how he has amassed savings while you as a couple have £9k in debt?

We both work full time and we earn pretty much the same.

The deposit was mostly his, £15k and £5k me.

We have a joint bank account where we both pay equal amount in and then the mortgage, bills and debt payments come out from it.

His savings are mainly endowments he has had from a number of years ago that matured in the last 3 years, plus his inheritance as I said. The debt was accummulated in the first couple of years we got the house as we focussed on spending rather than the relationship that was going wrong even then.

Hope the above clarifies a bit and thank you for helping.

caramelshortcake

NewKittenHelp wrote: »

So you have about £35k in equity, but £9k in debt.

I'd say that about £10,000 would be a fair amount for him to pay you, once the debt's been paid off. Though legally, he's not obliged to pay for the debt in your name, and it could be a costly legal battle to force him to pay his £1,500 share to you.

Would he be willing to pay down the mortgage, once you've been removed from it, in order to make it more affordable for him?

Thanks for your post. I imagine he would use his savings to pay off an amount off the mortgage, once I am not on it as it wouldn't make sense to do that now, when he knows I am leaving. Hope that makes sense.

lazer

caramelshortcake wrote: »

We both work full time and we earn pretty much the same.

The deposit was mostly his, £15k and £5k me.

We have a joint bank account where we both pay equal amount in and then the mortgage, bills and debt payments come out from it.

His savings are mainly endowments he has had from a number of years ago that matured in the last 3 years, plus his inheritance as I said. The debt was accummulated in the first couple of years we got the house as we focussed on spending rather than the relationship that was going wrong even then.

Hope the above clarifies a bit and thank you for helping.

So other than the house and bills you have kept your money seperate, that simplifies things.

My advice on what is fair then is:
Sell house: £185k
Pay of Mortgage (150k)
Pay off Debt ( 9k)
Remaining £26k

You could spilt this in one of 3 ways - either repay the initial deposits and spilt the rest
Ie £15k + £3k for him - £18k
£5k + £3k for you - £8k

Return at same spilt as deposit
ie 3/4 to him - £19,500 to him
ie 1/4 to you - £6,500 to you

Calculate the loss of value of the equity paid for by the deposit and spilt remainder: (House cost £200k, now worth £185k - 92.5%)
Therefore his original £15k of house is now worth £13,875
your original £5k is now worth - £4,625
Total value of the original deposit -£18,500

So he gets £13,875 + £3,750 = £17,625
you get £4,625 + £3,750 = £8,375

The third way is obviously most favourable to you, but it also correctly reflects what has happened with the equity in the house, other than the original deposit all other payments to the house have been 50/50 - so you both bear the responsibility for the loss of value for these payments.

However - as £6k of the debt is in your name and only £3k in his - there is no legal responsibilty for him to pay your share, but likewise there is (in all probability) no legal responsibility for you to pay him back his full share of the deposit (Assuming the house is owned equally by both of you - with no agreement re:sale at the time of purchase)

NewKittenHelp

caramelshortcake wrote: »

We both work full time and we earn pretty much the same.

The deposit was mostly his, £15k and £5k me.

We have a joint bank account where we both pay equal amount in and then the mortgage, bills and debt payments come out from it.

His savings are mainly endowments he has had from a number of years ago that matured in the last 3 years, plus his inheritance as I said. The debt was accummulated in the first couple of years we got the house as we focussed on spending rather than the relationship that was going wrong even then.

Hope the above clarifies a bit and thank you for helping.

In light of the above post, I think that £12,500 to you would be a very fair amount. That's before the debt in your name has been paid off, which I think should come out of your share.

That said - it does depend on who paid what of the £24k debts - if he's paid the majority of that off, then your fair share would be lower and vice versa.