How to split up the profit from this house sale

getmore4less

jjlandlord wrote: »

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

the investement also includes servicing the debt so you have to factor the equity that tghe debt bought as well as the deposit.

blackshirtuk

Depends on what was agreed at the time of purchase but if was agreed as 50-50 the following would apply
Selling price £407k

Mortgage £220k
Gross equity £187K

Person 1 paid 4k off the mortgage but no initial equity. He receives 4k

Person 2 paid 1k off the mortgage and 100k equity he receives 101k

187 - 4 -101= 82 divided equally = 41k

Therefore
Person 1 gets back 45K

Person 2 gets back 142K

Or if no agreement person 2 could argue that person 1 only owns 1% of the property and therefore is only entitled to 1% of the profit. in that case:

Person 1 gets 4k + (187x1/100) = £5870

Person 2 gets the rest 101000+187000-5870 = £282130

It depends on your definition of "fairest" and what was agreed at the purchase!

jjlandlord

getmore4less wrote: »

the investement also includes servising the debt so you have to factor the equity that bought as well as the deposit.

Which in total should be what OP listed:

Person 1 invested 4k in total, person 2 101k.
Seems only fair to split the proceeds along the same propertions: 4% v. 96%

BitterAndTwisted

The original deposit wasn't equal and neither were the mortgage-payments. I dunno what logic they may have applied but presumably there must have been some. I can't see it.

getmore4less

jjlandlord wrote: »

Which in total should be what OP listed:

Person 1 invested 4k in total, person 2 101k.
Seems only fair to split the proceeds along the same propertions: 4% v. 96%

thats not how it is done if you service £50k worth of debt you own £50k worth of equity that can go up/down in value.

You get the value of the equity back and thenmn pay of the debt(or whats left).

dimbo61

House has gone up £82,000 in one year?
London by any chance?
Has work been done on property? What work and who paid ?
Buying and selling costs? Someone paid stamp duty on £325K and solicitors fees, mortgage fees, searches, survey etc!
Have both parties lived in the property? Capital Gains TAX?
Selling costs more like £10/15K with London estate agents 2/3% plus legals etc ERC on Mortgage?

getmore4less

BitterAndTwisted wrote: »

The original deposit wasn't equal and neither were the mortgage-payments. I dunno what logic they may have applied but presumably there must have been some. I can't see it.

to round the numbers

if the house was £200k and one paid cash £100k and one borrowed and serviced £100k they wopuld be 50:50

if the house was £300k and one put down £100k cash and they each borrowed £100k is would be owned 1/3 and 2/3


people seem to get confused by the mortgage, pretend they borrowed of their mums and paid cash for the house.

the equity is split depending on hat htye pay. and that the ratio thye get back on sale.

thye each pay off their share of the debt, to their mums or a mortgage it is the same.

jjlandlord

getmore4less wrote: »

thats not how it is done if you service £50k worth of debt you own £50k worth of equity that can go up/down in value.

You get the value of the equity back and thenmn pay of the debt(or whats left).

How is that different from my post?

One person purchased about 4k worth of equity, the other 101k.
These relative stakes are 4% v. 96% and they should balance in 25 years.

getmore4less

Once you get the purchase equity shares right, the cost come off and it is net procceed that get split.

Any CGT comes out of the appropriate shares

getmore4less

jjlandlord wrote: »

How is that different from my post?

One person purchased about 4k worth of equity, the other 101k.
These relative stakes are 96% v. 4%

that is not what they bought


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

person two bought 51.37%
Person one bought 48.63%


it's not the £ they spent its the full amount of the debt they serviced