First Time Buyers - Couple, unequal deposits

Red-Squirrel_2

WilliamJH wrote: »

1. Agree that on sale the (assuming the house value does not drop) deposit is returned, e.g. 30k, remaining proceeds are split. Issue with this method is that any gains, which are made possible by the initial deposit, are split equally.

This seems sensible. I don't see why its an issue that any gains would be split equally. Are you seeing this as an investment and wanting a better return on your 30K? It would be better to view your 30K as something that is enabling you to take this step and make a commitment to and build a home with the person you love and want to be with for the rest of your life. (I assume you do want that, or it would be mad to buy a house together!)

I would suggest that you should also come up with a plan for what happens if one of you loses your job, or becomes unwell for a long period, or even permanently disabled, it does happen. Will you be expecting her to still pay 50% of the mortgage and bills if she's not working? Will her salary cover the payments alone if you were to be made redundant?

I hate to sound cynical, but you do sound quite concerned with coming out on top, and that's not a great sign if you're looking for a committed partnership where you look out for each other as well as yourself.

Bethg_2

I'm in a similar situation, I've ended up going on the mortgage in my own name after a lot of thinking and discussion. We've gone for a fixed rate for two years, so when that is up we will most likely shop around for a better deal (we are only putting 10% down)' hopefully by which point he will have more saved.

PenguinOfDeath

Wow.

I was in a similar situation the GF, most of our deposit was put up by him (approx 75/25%) he is older so has had more time to save...

I did wonder if he would want to protect his share but there was never any question of that, he saw it as OUR money going into OUR house. As I had done the vast majority of arranging viewings and sorting out the mortgage, house move etc I was OK with that.

I now earn more than him so am contributing more to the mortgage and house upkeep. Swings and roundabouts.

xHannahx

Cherry_Gale wrote: »

I would do it this way:

1, deduct sales costs
2, take your deposit back as a % of sale price after costs.
3, give the bank the balance of the mortgage
4, divide the remainder, half each (assuming you are paying half the mortgage each).

For example buy a house 100k with 30% deposit, sell 120k (after sales costs). You take back 36k, outstanding mortgage is by then 60k, that leaves 24k to split 12k each.

Also works if the value goes down: sell 80k after costs. You take back 24k of your deposit, the bank takes the other 56k, and you both have to pay off the balance of 2k.

You'd have to do 2 & 3 in reverse order, very few mortgage companies will release their mortgage on a shortfall amount.
If the value of the property goes down the value of his 30k contribution goes down. If the value goes down 10% his 30k deposit should drop 10% in value as well.
If it goes to negative equity your deposit is the first amount lost due to the mortgage companies security.

WilliamJH

Cherry_Gale wrote: »

I would do it this way:

1, deduct sales costs
2, take your deposit back as a % of sale price after costs.
3, give the bank the balance of the mortgage
4, divide the remainder, half each (assuming you are paying half the mortgage each).

For example buy a house 100k with 30% deposit, sell 120k (after sales costs). You take back 36k, outstanding mortgage is by then 60k, that leaves 24k to split 12k each.

Also works if the value goes down: sell 80k after costs. You take back 24k of your deposit, the bank takes the other 56k, and you both have to pay off the balance of 2k.

I think this is the most appropriate method. On another note my partner will be contributing a deposit now, which will help to absorb any losses (however unlikely).

For example:
200k purchase price. Person 1 - 30k deposit (15%), Person 2 - 10k deposit (5%), total equity 20%.

House sold for 250k, additional equity from repayments = 5%.
Deposit return:
Person 1 - (250k x 15%) =37.5k
Person 2 - (250k x 5% ) =12.5k
Remaining equity return:
(250k/2 x 5%) = 6.25k Each

Totals
Person 1 = 37.5k+6.25k =43.75k
Person 2 = 12.5k+6.25k= 18.75k

I'm just hoping the average solicitor can understand the maths (doesn't seem very complex to me).

Any criticisms of the above method welcome. Losses obviously leave risk on the larger deposit, but cannot be avoided.

Kynthia

There is no 'best' solution so you both need to agree one. However one is not to buy together until you are at the stage when you are ready to marry and share your finances. It's a massive commitment as involves a huge joint debt lasting longer than most marriages linked to an asset that can decrease in value and take months to sell. Consider buying on your own or waiting until your relationship is more serious.