Money out on mortgage - complex question

sonypc100

Hi

Ok, I'm trying to help a friend with the answer to this but I cant work out how it would be done. I'll try explain it in the most easy terms...

Ive come up with 3 solutions for them already but I dont think any are correct.

Person A and B co-habit and buy a house together. Person A had £30k spare and put this in towards the deposit on the premise they could withdraw it at anytime.

This was 15 years ago and the house has shot up in value.

Person A doesnt want anymore than the £30k out even though I said its probably worth a lot more if you saw it as an investment when it was deposited.

Person A now wants to take the £30k out. Person A and B are still going to continue co-habiting and all is good.

So when the £30k comes out it will have to go on the mortgage as a loan (if successful), should this extra monthly payment be shared equally between A and B or as it was A's money to start with, which they are just taking back should the payment belong to B?

I really cant get my head around it?!

getmore4less

This is what is happening assuming they split the mortgage 50:50.

By putting £30k down A has given B a £15k interest free loan so they put down £15k each.

Taking out £30k now they get £15k each(and pay the mortgage on that share) and B pays back A the £15k loan(so A gets £30k).

sonypc100

Thanks for the reply.

Yes the mortgage is a 50:50 split.

I think we were all trying to over complicate it and the solutions were getting more complex the more we thought about it.

Makes sense now, thanks for your reply.

getmore4less

You can use an equity model, but it seems that they are happy with the ownership 50:50 and "loan/get you money back" model.

example of the equity model.

costs £130k, £30k deposit £100k 50:50, house now worth £200k.

ownership at purchase is 80:50 (approx. 61.5% 38.5%)

"A" could keep their 80/130 of the property and just take on the new debt.

or if you want you could recalculate the equity.

30/130 is now worth ((30/130)*200) £46154. or 23.1%

if you keep the new mortgage 50:50 then A is selling 15/46 to B. or 32.6% of 23.1% around 7.5%. (15/200 is the other way to look at it )

The new ownership would be 54% 46%
(note you don't need to know what has been paid off on the mortgage so far)

15 years will make the numbers very different but the algorithm works for equity.

sonypc100

Thanks again, have printed this out to digest, I think they are happy to keep the property 50:50 but on my OP I talked about 3 solutions I was trying to offer, I think I was badly trying to get to equity, which you have done so concisely.

Thank you.