Splitting an appreciating asset based on past loan values

getmore4less

Again that is not solving the problem the OP want to solve which is how to take account of the present value of the loans.

CathA

mcstafford wrote: »

Morning! This is my little mathematical challenge :-)






[*]Once the deduction is made from the "sale value" at some point in the future, there is a "residual" percentage of 10+8+5 = 23%
[/LIST]

• Does this whole 23% get "added" to the share of the fourth child (no loan) or does something else happen to it?

• (The purpose of the exercise is to make sure the fourth child is not "disadvantaged" by the time-value of money, by tracking it to a house price that will increase over the coming years)/QUOTE]
  
  The same maths works for the 23% 'left over'. Divide by 4, each child gets a quarter of it. Child 1,2 and 3 have already had their percentage taken off, everyone gets 1/4 of the money.

DandelionPatrol

CathA wrote: »

... The same maths works for the 23% 'left over'. Divide by 4, each child gets a quarter of it. Child 1,2 and 3 have already had their percentage taken off, everyone gets 1/4 of the money.

Essentially your method is the same as mine in Post №2. It does not matter if you work it out in £ or %.

mcstafford

Thank you to everyone who has taken the time to respond. I really appreciate it, and it's good to see not only some different perspectives, but also some of the additional considerations. For reference, I am not child "A, B, C or D" - I am married to one of them :-) Cath A's approach is closest to our situation, I think - and we have opted for a percentages version in order that the person who has borrowed nothing effectively retains a higher percentage of any future sale value. There are risks - as a couple of people pointed out, the house could have no value in the future - and those things need to be considered. Thanks again - this has been very helpful.

G6JNS

mcstafford wrote: »

Thank you to everyone who has taken the time to respond. I really appreciate it, and it's good to see not only some different perspectives, but also some of the additional considerations. For reference, I am not child "A, B, C or D" - I am married to one of them :-) Cath A's approach is closest to our situation, I think - and we have opted for a percentages version in order that the person who has borrowed nothing effectively retains a higher percentage of any future sale value. There are risks - as a couple of people pointed out, the house could have no value in the future - and those things need to be considered. Thanks again - this has been very helpful.

Despite all the well meaning advice I think perhaps you need to get some professional advice. It seems to me the sort of thing an actuary would be able to help you with. They deal day in, day out, with past, present and potential future values so it would be right up their street.

mcstafford

While I totally agree that professional advice might be a good idea, I don't think there is anything particularly actuarial about it - the purpose of using a percentage (corrected) of a future, unknown value is that there is no requirement to hazard a guess (or make a sensible actuarial prediction...!) of the future value of the house. Thanks.

G6JNS wrote: »

Despite all the well meaning advice I think perhaps you need to get some professional advice. It seems to me the sort of thing an actuary would be able to help you with. They deal day in, day out, with past, present and potential future values so it would be right up their street.

G6JNS

mcstafford wrote: »

While I totally agree that professional advice might be a good idea, I don't think there is anything particularly actuarial about it - the purpose of using a percentage (corrected) of a future, unknown value is that there is no requirement to hazard a guess (or make a sensible actuarial prediction...!) of the future value of the house. Thanks.

The question you have to ask yourselves is do we want to risk all sorts of potential difficulties if someone decides to challenge the arrangements in future. This could be HMR&C or one of the parties if relationships go bad. A few hundred pounds spent now may well be good insurance against future problems. It is emphatically not something to DIY.

jackyann

getmore4less wrote: »

So these loans to buy a house, are they declared on the mortgage application or down as gifts.

Not actually relevant to the exact situation.