House buying couple but all one persons deposit. How to fairly split the house? Trust

first_time_major

Myself and my partner (not married) are in the process of buying a house. I have the full deposit and they have some minor debts that she is paying off consistently and they will be gone in the next couple of years. I have no problem with her finances. We have planned to both be paying equally each month on the mortgage.

I am putting all I have saved over many years into this property so I would naturally want to look after my money. Obviously we don't plan on anything going wrong but I
believe it would be wise to think about it now and set it out for it to be fair. Would a trust deed allow for a 50% each split, with the deposit also being returned to me out of her 50%? Would this be legally binding in all situations?

Additionally she is sensitive about this subject because of the situation. I have reassured her that her finances are not a problem but to breach this subject would be difficult. Any recommendations?

Ultimately I can forget it and let time correct it naturally with her paying for some household improvements for instance. Her fanancial situation is the short term after all. The deposit took a long time for me to earn but I was saving for this while single. Would you recommended this?

Many thanks in advanced for reading.

RAS

If you are doing a deed of trust, I would suggest that including agreeing what percentage you own, you agree what happens if you split up (sale within x months etc).

You need to talk because if you cannot talk about this you really need to think carefully whether it is a good idea to buy property together.

What happens if there is no increase in equity?

What happens if the property loses value?

And you would take out the deposit value then split the additional equity if prices increased.

comeandgo

But what happens if equity left in house after mortgage paid does not give your girlfriend enough to pay you back the deposit? How about on sale, you get your deposit back and then what is left is split 50/50.

KMMT

I did that 10 years ago in a declaration of trust. It said xxxxx gets £xxxx back on sale & any remaining equity is split 50/50 between her & xxxx

We split & sold recently. I got my money I put in back & half the rest of the equity.

We paid all bills 50/50 & were never married & never had children.

You can do it percentage wise but this was the easiest way for us. It was awkward having the conversation but he signed it & it was never mentioned again (until we split of course!!). It has all been very amicable but I believe that is because he can't argue with the legal document, no kids, & we weren't married!

Annisele

first_time_major wrote: »

I have reassured her that her finances are not a problem but to breach this subject would be difficult. Any recommendations?

If you can't broach this subject with your partner, you shouldn't buy a house with her.

It's very unlikely that you both have exactly the same opinions about money, and you don't want to discover the differences in the middle of an argument. It's much easier to discuss all this sort of stuff before buying anything - if you can't do it now, it'll be very hard indeed to do later.

If you actually can "forget it", that's one thing - but you seem to be assuming that the situation would need correcting, and that her paying for the lion's share of any home improvements would correct it. Maybe one of her assumptions about money is that all home improvements should be paid for by the higher earner - or that all costs should be split in proportion to income - or that all costs should be split evenly - or something else entirely.

There are many sensible ways to run finances between couples, but I think you do need to decide what works for you both, and not just fall into a habit on the assumption that your partner agrees with you in all things.

So far as the deed of trust is concerned, I think you need to think of as many situations as you can and work out what you'd want to happen in those scenarios. Death, separation, bankruptcy, house prices falling, house prices rising, etc.

What if prices fall so that your outstanding balance exactly equals the value of the house, and she wants off the mortgage. Does she have to pay you to leave? What if the house is repossessed in that scenario? Would you consider she owed you?

Jenniefour

I wouldn't recommend 'forgetting' it and hope it all comes out OK in the wash. Sit down and have that talk. If I were in her shoes I wouldn't dream of presuming that, in the event of a relationship breakdown, I could walk away with half. She may well welcome this being brought out in the open so you can reach an agreement that protects fairly your hard earned financial investment - which has allowed you both to buy. If the relationship lasts long term, you maybe get married, then you can review it.

But don't leave it and risk ending up like some very unhappy posters on here who didn't talk about it, didn't get a fair agreement and lost their original investment. I'm pretty sure the vast majority of them never thought the relationship would break up. Life happens.

CLAPTON

first_time_major wrote: »

Myself and my partner (not married) are in the process of buying a house. I have the full deposit and they have some minor debts that she is paying off consistently and they will be gone in the next couple of years. I have no problem with her finances. We have planned to both be paying equally each month on the mortgage.

I am putting all I have saved over many years into this property so I would naturally want to look after my money. Obviously we don't plan on anything going wrong but I
believe it would be wise to think about it now and set it out for it to be fair. Would a trust deed allow for a 50% each split, with the deposit also being returned to me out of her 50%? Would this be legally binding in all situations?

Additionally she is sensitive about this subject because of the situation. I have reassured her that her finances are not a problem but to breach this subject would be difficult. Any recommendations?

Ultimately I can forget it and let time correct it naturally with her paying for some household improvements for instance. Her fanancial situation is the short term after all. The deposit took a long time for me to earn but I was saving for this while single. Would you recommended this?

Many thanks in advanced for reading.

your suggest is frankly absurd

lets take an example

your deposit is 40k

the house is bought for 200,000
so mortgage of 160,000

lets say you break up in a few months and the house is still worth 200,000

equity 40k so each get 20k each
but you expect her to give you 40k so you walk away with 60k and she is 20k in debt

if you want to do something like this write it out EXACTLY in proper English and try out a variety of scenerios

Annie1960

And what happens if you have children?

Kynthia

You need to talk. Just start the conversation by asking how she thinks the ownership, mortgage repayments, structural improvements, bills, etc should be split and why, then you say what you think and why, then you both work together to come up with a scenario you are both happy with. Then also discuss an exit plan and contingencies for should you split, the property loses value, one of passes away (as you aren't married who inherits half the property), one of you loses your job and can't afford their share of the mortgage, etc. Then write it down.

Regarding the unequal deposit there are three ways I would consider, but that doesn't mean they are right and other ways are wrong as long as all parties agree.
1. Equal ownership but you get your deposit back from the proceeds of the sale after fees first and then any remaining equity is split equally. All purchasing costs, mortgage repayments and property improvements (ones that improve the property value like a new kitchen or extension rather than normal decorating and furnishings) are split 50:50. Downside is that if you own for a long time your deposit doesn't grow with inflation and if their' negative equity it's your deposit a risk, but upside is that you both benefit equally if the property increases in value.

2. Equal ownership and equal split of bills. Your partner makes extra payments on the mortgage or works needed within the next 2 years or so that equals the deposit you put down. This can be difficult to enforce and put in a trust deed as what if you split before she's matched your deposit or just doesn't do it. Probably works best if your deposit is small and can be matched relatively quickly.

3. You own a greater percentage of the property, and this is what percentage of the purchase price your deposit is plus half the remaining value (eg property is £200k and your deposit is £40k, so you own 60% and she owns 40%). You would then split the mortgage repayments equally as you each own that element of the property equally. However all purchasing costs, stamp duty, and property improvements you would pay 60:40 to reflect the ownership and when you sell that is the split of the proceeds . The advantage is that your deposit grows if property prices increase as it's bought you the extra percentage if the property, although that does mean your deposit could decrease if the property sells fir less than you paid. Plus you may not be happy paying for more of the costs.

nabberuk_2

CLAPTON wrote: »

your suggest is frankly absurd

lets take an example

your deposit is 40k

the house is bought for 200,000
so mortgage of 160,000

lets say you break up in a few months and the house is still worth 200,000

equity 40k so each get 20k each
but you expect her to give you 40k so you walk away with 60k and she is 20k in debt

if you want to do something like this write it out EXACTLY in proper English and try out a variety of scenerios

I'm fairly certain he's saying if he put a £40k deposit down on a £200k house. If they then split up he would get the £40k out of the equity on the house and any left would be split 50/50.

Of course this doesn't account for if the house drops in price.

first_time_major

thank you very much for the replies!

Yes I didn't spell it out well but I'm glad many of you got that I meant I would take out the deposit on sale and then it is split 50/50 from there. I hadn't thought of all of the situations which has been an eye opener.

Absolutely this needs to be talked through, hence me seeking advice on how to go about it and I feel you have helped with suggestions. Many thanks.

Kynthia's second suggestion was an approach I was considering but of course it would still need to be discussed.

It is not the largest deposit but it took time to get and is all of my money. When I said about forgetting it I really meant that I don't want to be petty but as many have assured, it is worth discussing and getting something in contract to simplify the situation.

KMMT, your example is indeed simple and what I had in mind so it was very helpful to read your experience.
I will discuss it with my partner and seek a solicitor for advice.