Fair way to calculate share of flat

JamesCurt

Hi,

Firstly apologies if this has been discussed already. I’ll try and keep this simple.

I bought a flat with my flatmate 7 years ago, I paid the deposit of £20,000 and he didn’t pay anything. After 7 years I have paid £30,000 of the mortgage payments and he has paid £28,000, so in total I have contributed £50,000 and he has contributed £28,000.

Now I have been offered a job overseas so I will be moving out. If he were to buy my share what would be the fairest way. I have calculated my share to be 50,000/78,000 giving a 64% share, and he would get 36% share.

We have paid off £30,000 of the mortgage, the value of the property has gone up by £10,000, so we have £40,000 to share, and the deposit.

I know there are two ways of calculating this.

The first method would be
64% of the £40,000 = £25,600 + £20,000 deposit = £45,600
36% of £40,000 = £14,400

The second method would be to include the deposit into the calculation.
64% of £60,000 = £38,400
36% of £60,000 = £21,600

I know we should have drawn up a declaration of trust at the time but this wasn’t done.

In your opinion which method do you think is the fairest way to split.

Guest101

Well clearly the first one.

He/she didnt pay anything into the deposit, so why would they be entilted to any of the deposit?

martinsurrey

what was the house bought for? so purchase price

sazpot

I think the first calculation is incorrect. If you take the deposit away you have paid 51.7% of the mortgage payments. So you would get £20k plus £20690 = £40690 and your flat mate would get £19310.

I think who would be paying the legal fees and the fact you are the one leaving and getting an easy sale of your half should be taken into account.

lolarentt

I would have thought a fairer way of splitting would be for you to take back the deposit you paid, plus a suitable amount of added interest (which will come from the profit of £40K)..then divide the rest of the profit between you (or split 52:48 to reflect the mortgage repayments)

seriousDFW

sazpot wrote: »

I think the first calculation is incorrect. If you take the deposit away you have paid 51.7% of the mortgage payments. So you would get £20k plus £20690 = £40690 and your flat mate would get £19310.

I think who would be paying the legal fees and the fact you are the one leaving and getting an easy sale of your half should be taken into account.

I'm no expert but I agree with this. The problem with your original calculation 1 is that you've included your deposit when deducing the %s contributed, but you've excluded it when sharing the profits, which isn't fair.

JamesCurt

sazpot wrote: »

I think the first calculation is incorrect. If you take the deposit away you have paid 51.7% of the mortgage payments. So you would get £20k plus £20690 = £40690 and your flat mate would get £19310.

I think who would be paying the legal fees and the fact you are the one leaving and getting an easy sale of your half should be taken into account.

lolarentt wrote: »

I would have thought a fairer way of splitting would be for you to take back the deposit you paid, plus a suitable amount of added interest (which will come from the profit of £40K)..then divide the rest of the profit between you (or split 52:48 to reflect the mortgage repayments)

Thanks, your calculations does make more sense. I got my calculations from another website. I forgot about the legal fees afterwards, I think we'll split the cost on that.

fart

Because it's a mortgage you don't theoretically own anything, therefore I'd be happy taking back my 'share' of what i've paid off the mortgage dependent on the value now.

So you've paid £30k and he's paid £28k. I'm not too sharp with numbers but i think he's put about 48% in. In this case, i'd want 52% of the current value of the property + £20k.

So if it's worth £200k now and you put £20k deposit down, i'd want £124k.

May have overlooked something but this is how i'd work it out - if he didn't put anything down in a lump sum then he shouldn't be entitled to a percentage of that money - he's only entitled to the percentage he's paid off the mortgage. If you look at it from his point of view, if the house was worth £210k for example, and you put a £20k deposit down, making the total outstanding £190k, and the house is now worth £200k, without taking your deposit back and going on payments alone he'd get £98k, you'd get £102k. Take off your £20k deposit, and you actually only receive £82k. So he gets more than you even though he's paid less.

Take back the deposit then share the current value of the house 52/48 - that's what i'd do anyway and i'd be happy with it.

Him having £20k spare would be handy - he could just split the property price with you fairly then give you £20k separately, would make it easier.

nobblyned

You don't give the outright numbers so can't calculate percentages. But essentially with the 20k deposit, you bought 20k worth of the house, so you get the 20k back plus whatever percentage the house value has increased by.

The remainder of the house was bought via a mortgage of which you paid roughly 52%, so you get 52% of the paid down £30k and 52% of what remains of the £10k price increase after some has been allocated towards the deposit appreciation as above.

tim123456789

nobblyned wrote: »

You don't give the outright numbers so can't calculate percentages. But essentially with the 20k deposit, you bought 20k worth of the house, so you get the 20k back plus whatever percentage the house value has increased by.

The remainder of the house was bought via a mortgage of which you paid roughly 52%, so you get 52% of the paid down £30k and 52% of what remains of the £10k price increase after some has been allocated towards the deposit appreciation as above.

+1, this is exactly how it should be done.

tim

JamesCurt

nobblyned wrote: »

You don't give the outright numbers so can't calculate percentages. But essentially with the 20k deposit, you bought 20k worth of the house, so you get the 20k back plus whatever percentage the house value has increased by.

The remainder of the house was bought via a mortgage of which you paid roughly 52%, so you get 52% of the paid down £30k and 52% of what remains of the £10k price increase after some has been allocated towards the deposit appreciation as above.

The purchase price of the flat was £140,000 and the value is now £150,000.

Thanks everyone, I have a better understanding of how to do this now.