RTB property, additional investor?

fablanta

Henriettaah wrote: »

I will be purchasing my home via the RB scheme. I would probably need a mortgage for £60k. However, my partner would be able to invest £25k, meaning that the mortgage would end up being £35k.

If the property was to be sold - ~~~ how would the value be divided?

Would it be 50:50 ?

Would it be current value minus £25k + total mortgage paid off : the rest ?

I think you underestimate what a huge contribution that £25K would make. Say you couldn’t afford a separate deposit of your own and you had to get a mortgage for the full £60K. Using the MSE mortgage calculator (https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator ) a 60K mortgage over 15 years at 6% would be £506/month and cost over £32K in interest (ignoring setup fees). With just £35K to pay back you would only be paying out £295/month and the interest paid would be just over £19K. Adding that up you would save (just under) £13K in interest or £211/month in payments (probably get a much lower interest rate as well).

If it were me I would certainly not be happy to just get my £25K back especially when you think that with inflation the sum would be worth less than £25K in purchasing power by the time the mortgage was paid off. I think a fairer way to go would be in percentages. After 20 years with the council I assume that the £60K you have to pay represents the maximum 50% discount so that is your deposit on the full market value of £120K. Your partner’s deposit of £25K is roughly 21% of the market value leaving you each to replay half of the 29% mortgage. So your contribution toward the full market value would be 64.5% and your partner’s 35.5%. The 50% virtual deposit you contributed was actually the rent you would have had to fork out anyway so if we were just going by the cash used solely to purchase the house your partner’s contribution would be just under 71%. Because of this, if you were to go your separate ways, I would suggest that your partner’s share of the net proceeds be somewhere between 35% and 71%.

Halfway between 35% and 71% is 53% so yes, 50:50 sounds okay Whatever you decide make it legally binding, just in case.