Joint Mortgage but differing monthly repayments

MB330

Hi,

I'm wondering if someone might be able to help with a query.

I've applied, and been accepted, for a joint mortgage with a friend on a flat in London. We're looking to exchange & complete in the next couple of months (fingers crossed).

It is looking likely that one of us will want to make larger monthly overpayments than the other. We will start by paying 50:50 and then as soon as someone overpays, the interest due on the next payment will have been reduced. Our confusion comes when we try to calculate who is obliged to pay what on the next payment and there don't seem to be any calculators online to help with this.

Someone overpaying long term will create a significant advantage in terms of the total amount of interest being repaid. This should, therefore be reflected in their monthly repayments which would now not be fair @ 50:50.

Anyone have a good idea how this should be calculated?

Thanks.

Thrugelmir

Sounds an extremely complicated idea. I would recommend sticking to to fixed % contribution. Unless you want to spend your life maintaining a spreadsheet.

MB330

I do love a good spreadsheet

The difficulty is, I will want to clear my half of the mortgage as quickly as possible. I'd rather not pay interest when I don't have to...

Thrugelmir

MB330 wrote: »

I do love a good spreadsheet

The difficulty is, I will want to clear my half of the mortgage as quickly as possible. I'd rather not pay interest when I don't have to...

You are jointly liable for the mortgage. Have you had a declaration of trust drawn up to cover every eventuality?

MB330

yep, our solicitor is working on a joint ownership trust deed as we speak.

I'm trying to work out what the best approach is for overpayments...

getmore4less

It is actually very easy.
Just pretend it is two loans 1/2 each.


Be careful the evidence on here is a lot of solicitors cant do this sort of trust deed.
Might be worth putting what they come up with here for comment.

The important thing is to separate the equity from the debt once set up.

Decide your equity at start and make sure any capital investment to ownership is split at that %.

Then treat your debt separately.
Depends how accurate you want to be as lenders do things slightly differently.

A simple(with monthly breakdown) mortgage calculator will get you close enough in most cases
http://www.whatsthecost.com/mortgage.aspx

If the rate is good enough then just saving may work to simplify futher or consider an offset.

getmore4less

To explain further to model with the calculator.

You can ignore the term and just use the payments made.

To start with set up 2 loans 1/2 each enter the interest rate and the payment(interest only) hit calculate then details

That will show you the amounts owing month by month.
For a lump sum overpayment you just adjust the amount owing on that loan and start again.

Regular overpayments you just stick the total payment on each loan.

This will work even if you each do overpayments of different sizes.

The more times you change the payments or do lump sums the more work you need to do.

A simple table with 12 entries a year will be all you need if you want to track manualy

You may find that locoblades spreadsheet may already have this sort of thing built in or might be a good start for building one.

The trick is you don't need to work out the payment split accurately just what you each pay as long as it is more than the contractual payment and under any penalty amount it just works using the calculators to track each persons payments.

silvercar

MB330 wrote: »

I do love a good spreadsheet

The difficulty is, I will want to clear my half of the mortgage as quickly as possible. I'd rather not pay interest when I don't have to...

Even if you cleared half the total mortgage, you would still be legally liable for the other half.

HappyMJ

silvercar wrote: »

Even if you cleared half the total mortgage, you would still be legally liable for the other half.

I was just going to post the exact same thing.

My advice keep it 50/50 and save in high interest savings accounts or make investments.

getmore4less

Savings do not help you are liable for 100% paid off or not, the circumstances that leave you liable for the "others" bit does not change you owing your bit.

A properly constructed trust doc will cover the can't pay won't pay scenario and adjust the cash distribution appropriately.
(but as I said this will probably be beyond a lot of solicitors).

Thrugelmir

getmore4less wrote: »

(but as I said this will probably be beyond a lot of solicitors).

Solicitors will draft what their clients instruct them to. Anything highly bespoke could be an expensive exercise. Not least that both parties will require independent legal advice.