Help with ownership percentages

Serafinaaa

Hello,

I'm just about to buy my first house with my partner. We are planning to pay the mortgage equally but we are contributing different amounts to the deposit. I'm really struggling to work out what that means for the percentage that we each own!

The house is £157,000
We are paying a deposit of 20% which is £31,400
We will have a mortgage of £125,600
I am paying £26,400 of the deposit. My partner is paying £5,000.

I initially worked out that we would own something in the region of 57% and 43% but when I tried some possible scenarios where we sold the house it didn't seem to work. E.g. If we sold the house in one year for the same amount of money and had paid back themortgage, then 57% of what was left would not be as much as I paid on the deposit and my partner would get more than he paid. :think::think:

This is really confusing me... Can anyone help?
Thanks!

Sally22_2

If it was me, I would get something drawn up by solicitor that if you sell (and arent in negative equity), you get your 31400 back and he gets his 5k back then you split any leftover equity between you equally so 50/50

As your not owning different percentages as you are paying the actual mortgage equally.

Thats the way I look at it anyway..!

Serafinaaa

Yes, I did think of asking of asking for something like this - but on the other hand it could be argued that my contribution is an 'investment' rather than a specific amount of money. Therefore if the house rises in price then that £31400 should actually grow rather than staying as a fixed amount of money.

sKiTz-0

Percentages look correct by my calculations. That is the way I would do it if moving in with my partner as I have a higher amount to use as a deposit compared to her. It covers you both if things don't work out, and doing it as a percentage covers you both in case of house price increases as well as house price falls. I don't understand how you are arriving at different figures though if you are selling for the same price.

Ahh, I see what you've done - 57 and 43 are percentages of the total house price, NOT the deposit.

With regard to the deposit of 20%, you are putting in 16.2% and your partner 3.8%, of the 20%. If you see what I mean. So you are putting in 81% of the deposit and your partner 19%. So you need to split what's left (the £31,400) by 89/19. Which gives your original figures.

Thrugelmir

Serafinaaa wrote: »

Yes, I did think of asking of asking for something like this - but on the other hand it could be argued that my contribution is an 'investment' rather than a specific amount of money. Therefore if the house rises in price then that £31400 should actually grow rather than staying as a fixed amount of money.

Are you expecting your relationship to end?

You are pooling your resources to make a life together. So any inequalities ideally should just be accepted. By buying a home together you will both benefit.

sKiTz-0

It's not a case of expecting the relationship to end. But if the relationship does end (as a lot of relationships inevitably do) then you don't want to walk away with much less than you put in, while your ex walks away with more than they put in. It isn't that you're expecting the worst and believing the whole thing to be doomed before it's started, just a case of covering yourself should that happen, after all it is out of your control.

I have this debate with my partner periodically and we never see eye to eye on it.

If it is the case that the house is split 50/50 in the event of splitting up, then in the original OPs example, I would only be matching my partners £5000 deposit, as I believe the deposit should be equal as well in that case. Any other way would be an unfair way to do it.

My remaining £26,400 would be going in the highest paying savings account.

Using the figures from the OPs example then if the house sold for the same price (not taking into account any mortgage payments - lets say they split up the day after moving in and the house sells a day later) they would both be walking away with £15,700 each on a 50/50 split. How is it fair that the OP loses £10,700 while their (ex) partner gains £10,700?

ETA - maybe my view on things like this is the reason none of my relationships make it past the 2 year mark! haha

Sally22_2

Well going on the logic that your giving, Im putting 100% of the deposit in on my purchase with my partner, so if we were to split after say 10 years, I would get 100% of any equity and he would get nothing even though he will have paid 50% of the mortgage payments in that time. Bit unfair for him really. I cant afford the mortgage without his salary and he cant afford it without my deposit!

I dont really see property as an investment. Say you split and you were in negative equity, would you pay the bigger percentage of that or would you expect him to be liable for 50% of the negative equity? If you want your money invested, put it in a savings account and not a house IMO.

I still stand by my first comment. You each get your original deposits back then split the equity 50/50. Then you have still made money and so has he and its fair for everyone! That is how I'm doing it anyway, and obviously if your both happy with your agreement then everything is ok!

Building_Surveyor

i personally would not be buying a house with someone who i was thinking might fleece me at the end of it should we split up.

how are you planning on splitting bills? is that going to be an issue if you don't split it by equal amounts.

Just like a pre-nuptial agreement, if i didnt trust the other person, i certainly wouldn't be entering into any sort of legal agreement, even if i was accounting for worse case scenario.
That's my personal opinion.

sKiTz-0

Sally22 - you misunderstand. I'm not saying you should keep 100% of the equity. I agree that would be grossly unfair on the person with less/no deposit. What I'm saying is that doing it my way - if you were putting a 25% deposit down and your partner none, then when the house sells you would get 25% of the price back - be that higher or lower than your original deposit. The other 75% would pay off the mortgage, and any left split 50/50. Or indeed if in negative equity, the remaining debt would be split 50/50. iyswim.

But that assumes both parties paying the mortgage payments 50/50. If, like in your example I was paying 100% of the deposit and they were paying a higher percentage of the mortgage payments I would say yeah, swings and roundabouts, go 50/50 if it comes to the worst case scenario.

Sally22_2

Sorry Skits, my reply (post #7) was replying to OPs post #3

MisterMotivated

Serafinaaa wrote: »

The house is £157,000
We are paying a deposit of 20% which is £31,400
We will have a mortgage of £125,600
I am paying £26,400 of the deposit. My partner is paying £5,000.

There are a few possible options, though it might need a bit of negotiation and compromise as I'm sure you'll both be looking for the most favourable outcome personally. Assuming equal monthly payments, then in terms of total contributions, you will both get closer and closer towards 50% each as time goes on (but obviously never actually arrive at 50/50).

Your figures below suggest you're paying 84% of the deposit compared to your partner's 16%.

Let's say you bought the house today and sold for a £10k profit tomorrow before even the first mortgage payment was made. I think you should rightly expect 84% of that £10k profit, rather than splitting it £5k each, meaning you get just 19% return while your partner doubles his money. However, let's say you live there for many years and at during that time, you pay a total of £35k each toward the capital. This means out of a total payment of £101,400, you've contributed £61,400 (61%) while your partner has contributed £40,000 (39%). Once you paid off the full mortgage amount, the split would be, as you've said above, 57% and 43%.

In terms of the profit, you have several possible options:

• Ignore the equal monthly contributions and split the profit by the original deposit percentages. This is unfair on your partner as it's not taking into account any return on the monthly payments over the past 25 years, ONLY the deposit.
• Divide based on the overall percentage including contributions up to the time of the split. A little unfair on you because it means with every passing year, your investment grows less favourably than your partner's.

My suggestion would be:

• Take a percentage of the profit based on your initial deposits compared to the total value of the house when you bought it (ie your deposit is 16.8% of £157k, your partner's is 3.2%) and split the rest 50/50.