How to split up the profit from this house sale

bobwilson

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.

the logic was to both own 50% after the 25 year term is up. had we both paid equal monthly payments, person 2 would have owned more than person 1.

bobwilson

getmore4less wrote: »

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

Just an input from someone else I just asked:

"There's no guarantee either person would pay the total 25 years so it cannot be based on future estimates. It has to be on what has been contributed and spent. It's a 96/4 split"

getmore4less

bobwilson wrote: »

Just an input from someone else I just asked:

"There's no guarantee either person would pay the total 25 years so it cannot be based on future estimates. It has to be on what has been contributed and spent. It's a 96/4 split"

That's not correct.

They were servicing the debt that bought the equity so they get that share of the equity and are responsible for that bit of the debt.

The 25 years is not relevant

you had the right idea but got it slightly wrong anyway

for £325k cost that's £162500 each

No2 share of the £225 debt should have been £62500 as you put in £100k

62500/225000 * £1139= £316.39 not the £339 they were paying.

how did you get your numbers?

Think if you borrowed the money from somewhere else separately and bought for cash, 50:50 but were servicing your own debts.

Just because you used a joint mortgage does not change the financial model of getting debt seperately.

getmore4less

bobwilson wrote: »

the logic was to both own 50% after the 25 year term is up. had we both paid equal monthly payments, person 2 would have owned more than person 1.

by splitting the debt that way, you own 50% of value from day one.

OurKev

Seems simple to me - unless an agreement was in place as to how profits would be split:-

1. Sell the house, pay off mortgage and all costs.

2. Take out the full amount each has paid in.

3. Share the remainder 50-50.

After all, the intention was that each would end up with an equal share of house and any profit on sale wasn't it?

The fact that the sale was earlier than anticipated shouldn't change anything in my opinion.

getmore4less

OurKev wrote: »

Seems simple to me - unless an agreement was in place as to how profits would be split:-

1. Sell the house, pay off mortgage and all costs.

2. Take out the full amount each has paid in.

3. Share the remainder 50-50.

After all, the intention was that each would end up with an equal share of house and any profit on sale wasn't it?

The fact that the sale was earlier than anticipated shouldn't change anything in my opinion.

It is clear there was an agreement in that the debt is not equal by the difference in payments with the intention of the property being owned 50:50.

tigsly

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 £220

Here Is how I would split it:

The house has increased in value by around 25%
So you should both get 25% of your initial investment
Deposit therefore =
1 = 0
2=125 000
Assuming you have paid in for 12 months:
Person 1 has paid – 9600 in repayments this has earned(+25% = 2400) = 12,000
Person 2 has paid – 4068 in repayments this has earned + 25% = 1017 = 5,085

So person 1 – has a ‘new total’ of 12,000
Person 2 has a new ‘total’ of 130,085

Both parties now have 142,085
Leaving 264,915 of the ‘sold price’

You then need to pay the mortgage company back £225 – so you have 39, 915 to share – 50 /50

Or take your ‘fees’ out of this – and split what is left 50/50
(my maths might be slightly out in terms of %.. but a 25% return doesn’t seem bad to me!)

getmore4less

bobwilson wrote: »

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

can you clarify what the £4k and £1k are here?

bobwilson

getmore4less wrote: »

for £325k cost that's £162500 each

You're assuming that two independent loans were taken out at £162.5k each. That's not the case.

The loan is £225k in total, it isn't officially split. We decided to try to make payments to make it 50/50 after 25 years, personally between us. There was no guarantee of either of us following through. Our ownership was going to be based on how much we ended up contributing, hopefully 50/50 if we manage to pay it each, otherwise less/more depending on who paid more.

bobwilson

getmore4less wrote: »

can you clarify what the £4k and £1k are here?

capital repayments