Declaration of Trust - calculations help

foxy-stoat

Guest101 wrote: »

True, though im not sure.


But it certainly didn't see like he/she intended B to gain extra on the initial deposit

It would if the purchase is unequal shares. The share of the gain/loss will need to be worked out if they split in 1,2,5,10 years.

Issue is that a lot can change in 10 years, house could of doubled in value. If it did happen then one party would make a higher gain than the other, but if the property lost value then one party should bare a higher loss than the other...makes it complicated and unfair. Equal shares with stated deposit is a clearer way.

getmore4less

my post from the duplicate thread

115AJ wrote: »

Myself and my partner (B) are buying a property together. We will be tenants in common with unequal shares with a Declaration of Trust.

In total our deposit towards the property is 37.5k.

Purchase price £249,999. We have a LTV of 85%

B's grandparents have gifted B 20k and B's mother has gifted B 10k - both towards the cost of the deposit.
If B and I were to separate, both B's grandparents and mother would like the money to be awarded to B.

The remaining 7.5k deposit is contributed equally from myself and B.

We will equally be contributing to the mortgage payments, bills and legal fees including stamp duty.

Could anyone suggest what percentage of shares would be fair on the Declaration of Trust?

if you want to do proper equitable shares then you also need to add in all buying costs and who pays those .

total £250k deposit £37.5k mortgage £212.5k
A. £7.5k/2 + £212.5/2 = £110k
B. £30k + £7.5k/2 + £212.5k/2 = £140k

that's 44%:56%

sell split the total at those % after fees but before paying the mortgage then pay 1/2 the remaining mortgage each.

As long as you keep paying the mortgage 50:50 including overpayments it will work.

Any households improvements repairs should be split at the equity %.


you could own 50:50 and split the mortgage to make it equal.

getmore4less

foxy-stoat wrote: »

Errrrr, just write down each owners deposit amounts and everything else is split 50:50, and proceed with equal shares.

Makes it very easy and clear without any complicated sums....in the event of a split in the future this will just be another thing to argue about.

That is an interest free loan to the other person for 1/2 you input it does not reflect the equitable risk and fails the work for all numbers test.


EG if the house cost £100k

A.. puts £99k down B £0k and there is a £1k mortgage paid off in the first week

House goes up £10k they get £5k profit each

House goes down £10k B. now owes A. £5k

getmore4less

e13 wrote: »

TLDR: You either need a complex balance transfer formula based on mortgage payments or to do what guest says.

The alternative is a solution based on shares in the property.

eg, you are putting in 1.5% of the property value and 50% of the mortgage costs.

Your partner is putting in 13.5% of the property value, and 50% of the mortgage costs.

So you've got 1.5% to start with, plus 50% of the remaining equity, and they have 13.5% to start with plus 50% of the remaining equity.

So that would give shares of 56% for your partner and 44% to you.

But if you wanted to sell and paid off 12.5k from the mortgage, you've then got a scenario as follows:

250 sale price.

200 mortgage

50k split between the two of you in that ratio doesn't give them back their deposit.

So! I think the best (simplistic) way of dealing with this is to take Guest's suggestion. If you want a route whereby your partner gets a return on their "investment" of 33.75k should prices go up, then you'd need some sort of transferring balance formula that shifted the balance of equity more and more towards you as you paid back the mortgage.

Equally, you're going into this as a partnership - maybe you just want to treat is that? Otherwise what will you do if one of you gets a big payrise/paycut? Will you now not be able to go on holiday together because one of you has still got to manage your half of the mortgage while the other has a big surplus in their income?

you don't need any complex calculations the equity is determined at the start by cash and debt you service.

As you pay of the debt your equitable share does not change

it does not mater if the cash used to buy the place comes from your own savings, your mum or a bank, it buys part of a house.

jamei305

Do you need a Deed of Trust? Why not have her parents register a second charge on the property, so if it's sold they get their money back plus her extra share to give to her plus interest if required.

silvercar

jamei305 wrote: »

Do you need a Deed of Trust? Why not have her parents register a second charge on the property, so if it's sold they get their money back plus her extra share to give to her plus interest if required.

Many lenders will not be happy with that, particularly if the deposit was declared as a gift from relatives.

NYM

Surely A is only 'borrowing' 50% of the gift money?

I'd want a 50/50 split and regardless of rise or fall in value of the property should they ever split up, A still owes B £15,000.

Or is that too simple?