Working out % share of house - tenants in common

Insert_Username_2

Hi all,

I wondered if anyone could provide some advice.

My flatmate and I have decided to buy our first property (we've known each other for 8 years and been living together for 2 with no problems, and this is the only feasible way of getting on the ladder for the next 5 years or so).

He will be contributing £20k to the deposit to my £10k. We plan on paying the mortgage 50:50. Is there a precedent for working out your share of the property after any sale? I figure the options are:

1) Using today's money: taking 20k/10k off the value in 5 years, then dividing the rest by two
2) Using percentages: supposing the house is 200k, taking 10%/5% from the value of the house then dividing the rest by two
3) Me paying a proportionately higher share of the mortgage to the point where we have paid "equal", then reverting to 50:50.
4) Something else?!

Thanks in advance for any guidance. We will, of course, be using the appropriate legal/mortgage advisors, but just wanted to get an indication of how it could work going forward.

G_M

He owns 66.6% (2/3rds or 20/30ths)

You own 33.3% (1/3rd or 10/30ths)

You split all mortgage repayments, maintenance and running costs 50/50.

jackomdj

I would go with option 2, ie if it is worth 100k now and 150k when it is sold he would get 2/10 (ie 30k) you would get 1/10 (ie 15k) then the balance of £105k you could split 50/50.

Or you pay the first £10k of capital repayment whilst sharing the interest repayment, which puts you both at a level base.

mysterywoman10

other option.....Just a thought or he loans you personally the 5K difference to put you both on a personal footing and you pay this back some other way??? Or is there any other way you can get the 5k?

Might save problems in the future and would put you on an equal footing in terms of ownership of the property?

paddedjohn

^^^^^^^^^^^^^ This to me seems the most sensible way of doing things, you lend £5k off him so you each contribute the same to the flat and then you pay him back weekly/monthly. its the least complicated option.

barnaby-bear

G_M wrote: »

He owns 66.6% (2/3rds or 20/30ths)

You own 33.3% (1/3rd or 10/30ths)

You split all mortgage repayments, maintenance and running costs 50/50.

no... because the mortgage company owns most of it....
she'll own 10% at the start.... not 33.3%

mysterywoman10

paddedjohn wrote: »

^^^^^^^^^^^^^ This to me seems the most sensible way of doing things, you lend £5k off him so you each contribute the same to the flat and then you pay him back weekly/monthly. its the least complicated option.

Or borrow the £5k from somewhere else and agree to put in an equal amount each? I wouldn't do it without it being on totally equal terms. Even if that meant buying somewhere slightly cheaper so that the deposit would be lower i.e. 20,000 not 30,000.

thelem

G_M wrote: »

He owns 66.6% (2/3rds or 20/30ths)

You own 33.3% (1/3rd or 10/30ths)

You split all mortgage repayments, maintenance and running costs 50/50.

That's fair if they sell tomorrow, but not very fair if they sell in ten years time when they'll have spent roughtly the same on the property.

A problem with option 2 is that it doesn't take into account the better mortgage deals you'll be able to get by providing a higher deposit. If you were to get separate mortgages for a £100k property each, then one lender I checked would offer him a 3.39% mortgage (2 year fix), while you would need to pay 4.39% - almost £900 extra in the first year.

This is probably a good time to decide what you would do if one of you is unable to contribute to the mortgage due to sickness or redundancy too.

tim123456789

G_M wrote: »

He owns 66.6% (2/3rds or 20/30ths)

You own 33.3% (1/3rd or 10/30ths)

You split all mortgage repayments, maintenance and running costs 50/50.

So if party 1 put down 10K and party 2 put down zero and they then split all costs 50/50 that would mean party 1 owned 100%

I think you should try again!

(BTW option 2 seems the fairest mathmatically)

tim

The_Earl_of_Streatham

Insert_Username wrote: »

Hi all,

I wondered if anyone could provide some advice.

My flatmate and I have decided to buy our first property (we've known each other for 8 years and been living together for 2 with no problems, and this is the only feasible way of getting on the ladder for the next 5 years or so)...

During which time you've not stress tested the friendship by owning a valuable asset, or in reality owing a lot of money jointly to a building society.

As well as dividing up the ownership you need to consider other things. What if one of you can't pay the mortgage, even for a month? What if maintenance issues arise and one of you can't afford to contribute? What happens if the value of your jointly held asset declines over the years?

What happens if one of you wants to move out or move someone in or get married. Of course, you're friends, you'll resolve those issues as they arise. Best resolve them now while there's no emotional or financial component to distort your thinking.

You're taking out a joint mortgage on a can of worms.

Probably just me, but I consider one of the best decisions I made was not buying jointly with a friend and settling for a bit less on my own. And since you ask, yes I do like living in a caravan with no indoor plumbing; you really have to weigh the advantages and disadvantages.:)

I'm just some bloke on the internet (but I really am an Earl, honest), your circumstances may be different.

pinkshoes

The deposit put down initially should be a % of the price the property was bought at.

When selling, each person should then get this % of the sold price back, then any other equity should be split 50/50.

In the case of negative equity when selling, it is split as per original percentages.

Make sure you have a contract drawn up stating what happens if one of you wants to sell, gets married etc...