How to split up the profit from this house sale

bobwilson

Myself and a friend bought a house together 1 year ago (tenants in common), and we're now selling. What's the fairest way to split the profit?

House purchase price: £325k
mortgage: £225k
person 1 house deposit: £0
person 2 house deposit: £100k
Total monthly fixed rate mortgage payments: £1,139
person 1 monthly payments: £800 approx (to equal 50% share in 25 years)
person 2 monthly payments: £339 approx (to equal 50% share in 25 years)

Current investment in house:
person 1: £4k
person 2: £101k
bank (outstanding mortgage): £220k

House sale price: £407k
Mortgage still left to pay £220k

These figures are approx, we haven't gone into the pennies! We would like to know what would be the fairest way to split it? If you can give figures it would help us to understand

Thanks

RAS

What did you agree when you bought the house? Deed of trust?

Gwhiz

If person 1 has paid in a years mortgage payments of 800, that is £9600.

I'm trying to understand how that differs from your 'current investment' figure?

CLAPTON

the best way would have been to agree before you bought but what I would do is

sale price = 407k
less selling cost say 7k

so 400k left
mortgage left 220k

so 180k
repay deposit of 100k to person 2


leaving 80k

work out each person contribution to mortgage
i.e. person 1, 800 x number of payment = 8,000
person2 , 339 x number of payment (say 10) = 3,390


so profit from the deal is
80k - 8k - 3.390k = 68.61k

so each get half i.e. 34.3k


so person 1 gets 34.3k + 8k
person 2 gets 34.3k + 3.39k + 100K


which hopefully ends up as 180k

Gwhiz

CLAPTON wrote: »

the best way would have been to agree before you bought but what I would do is

sale price = 407k
less selling cost say 7k

so 400k left
mortgage left 220k

so 180k
repay deposit of 100k to person 2


leaving 80k

work out each person contribution to mortgage
i.e. person 1, 800 x number of payment = 8,000
person2 , 339 x number of payment (say 10) = 3,390


so profit from the deal is
80k - 8k - 3.390k = 68.61k

so each get half i.e. 34.3k


so person 1 gets 34.3k + 8k
person 2 gets 34.3k + 3.39k + 100K


which hopefully ends up as 180k

Disagree. That £100K would have earned money in the bank (so need to factor in lost interest at a minimum) but also that investment made the purchase possible so I would include that as a proportion of the uplift in value, not a static amount.

jjlandlord

From the investment, person 2 put in 96%, and person 1 put 4%.

So that's how I'd split the profit as well.

getmore4less

bobwilson wrote: »

Myself and a friend bought a house together 1 year ago (tenants in common), and we're now selling. What's the fairest way to split the profit?

House purchase price: £325k
mortgage: £225k
person 1 house deposit: £0
person 2 house deposit: £100k

that buys 100/325 worth == 30.77%
Total monthly fixed rate mortgage payments: £1,139
person 1 monthly payments: £800 approx (to equal 50% share in 25 years)

that buys (800/1139) * (225/325) 48.63% - 70.24% £158k of the debt
person 2 monthly payments: £339 approx (to equal 50% share in 25 years)
that buys (339/1139) * (225/325) 20.60% - 29.76% £67K of the debt

Current investment in house:
person 1: £4k
person 2: £101k

now these have messed up how have these been done costs to house or overpayments on debt


bank (outstanding mortgage): £220k

House sale price: £407k
Mortgage still left to pay £220k

These figures are approx, we haven't gone into the pennies! We would like to know what would be the fairest way to split it? If you can give figures it would help us to understand

Thanks

The first thing you did was mess up the mortgage payments to be 50:50

ignoring the £4k and extra £1k need more info on these

one owns 48.63% of the value and 70% of the debt outstanding.
two owns 51.37% of the value and 30% of the debt.

getmore4less

CLAPTON wrote: »

the best way would have been to agree before you bought but what I would do is

sale price = 407k
less selling cost say 7k

so 400k left
mortgage left 220k

so 180k
repay deposit of 100k to person 2


leaving 80k

work out each person contribution to mortgage
i.e. person 1, 800 x number of payment = 8,000
person2 , 339 x number of payment (say 10) = 3,390


so profit from the deal is
80k - 8k - 3.390k = 68.61k

so each get half i.e. 34.3k


so person 1 gets 34.3k + 8k
person 2 gets 34.3k + 3.39k + 100K


which hopefully ends up as 180k

this is just not the way to do equitable shares

BitterAndTwisted

Why would the person paying less than half of the other one's monthly mortgage-payment have bought an equal share? I don't get that logic.

The most sensible way I think to do it is to calculate what percentage of the selling-price that original £100k investment has bought, and split the rest of the equity 66% to 33% after the selling-costs have been deducted.

Plenty of different ways to skin this particular cat!

getmore4less

BitterAndTwisted wrote: »

Why would the person paying less than half of the other one's monthly mortgage-payment have bought an equal share? I don't get that logic.

Bacause together with the 10k deposit they are funding 50% of the money(well it would have been 50% if they got it right)

The most sensible way I think to do it is to calculate what percentage of the selling-price that original £100k investment has bought, and split the rest of the equity 66% to 33% after the selling-costs have been deducted.

Plenty of different ways to skin this particular cat!

close but you just use the net proceeds split base on the equitable share andthen pay off your share of the debt.

the easy way to think about it is they both paid in cash and borroed the money seperately.

ANy algorith used should work for all values of deposits and debt sharing.

The example I did does that and in practice is the only way that is fair.

jjlandlord

B&T, I think this is basically the same as post #6: profit shared in the same proportion as the investment.