Gifted deposit and protecting contribution.

Homeowner2be

Hello, my girlfriend and I are looking to buy a house together, her parents are very generously giving her £25,000 for the deposit, we are both now saving up a little extra for the various solicitor and surveyor costs. We are looking to buy a house for around 230,000.
Once we have the house I'll be paying a good chunk of the monthly costs as I'm on quite a bit more than she is.

Her parents have said that if we are ever to break up that she would be entitled to the 25k they've given her and even want me to enter into an agreement through a solicitor agreeing to it.
However with me paying in more than she will be, what the best way to proceed so I don't lose out and eventually hold an equal share of the house? I just want it to be fair and to both get what we are entitled to if we ever did split up.

I've read a little bit about tenants in common, would this be a good move?

Any help apriciated.

Thankyou,

DebtClearer

Get married!

Seriously though those kind of agreements are not uncommon and I'm going through a similar situation with my gf however she does not want me to sign anything.

With both your names on the mortgage then you will be able to claim for any mortgage contributions moving forward but the £25k is ringfenced and rightly so. Afterall why should you have any right to it, it just assists you in obtaining a mortgage.

Not sure how you resolve the bills issue, if she is protecting the full desposit then I don't think it is fair for you to lose out on paying more bills.

Pixie5740

Your gf's parents are either gifting the money or they're not. If it's truly a gift then it's got naff all to do with them what their daughter does with that gift.

You could have a Deed of Trust drawn up setting out what would happen in the event of the relationship breaking down. Your gf getting the £25k back might not be fair for either of you. What if after selling the property and repaying the mortgage there isn't £25k left to her? I think % are a fairer way to deal with things as they take into account both rises and falls in property value. The fact that it sounds as though you'll be making more than 50% of the mortgage payments shouldn't be overlooked either.

Then again you could always through caution to the wind and get married. Shall I start hat shopping?

getmore4less

If you will be paying more of the mortgage chances are you should already own more then 50%.

Separate the costs of ownership from living in the place costs

do a trust deed based on equitable shares based on how much of the cost each can afford to support

Starting point total costs to buy including fees.
Assign the cash inputs from each of you then split the debt.

Hers will be £25k+ her contribution yours will be whatever that is.

an example £230k + £5k fees total £235k

you put in £4k she puts in £1k + the £25k from the parents. you get a £205k mortgage

if you want to own 50:50 then you need to bring your total upto £235/2-£117.5

You have £4k so far so need to service £113.5k of the mortgage she does the rest.

Problem is if she can't afford that much then you need to take on more of the debt and own more equity.

Kynthia

It really would be better to wait until you are married before buying. You are taking out a joint debt that lasts longer than most relationships, for hundreds of thousands of pounds, tied to an asset that can go up or down in value and can take a while to sell needing both of your agreement to do so. It's often a recipe for disaster for people that have only been dating a while.

If you insist of jointly buying then again going equal would be easier, with a trust deed specifying the return of any deposits and splitting the remaining equity. If you cant do equal mortgage repayments then presumably you've discussed this before putting an offer in and applying for a mortgage? What did you decide? Have you decided to own as tenants in common and if so what percentages, have you decided who will inherit your shares should one of you die, are you getting wills to specify this, have you discussed what will happen if one of you can't make their share of the mortgage, are you getting any life assurance or mortgage protection, etc? If not then why not as these are very relevant questions?

So if you decide to buy as tenants in commons then align the percentage according to your mortgage repayment percentages and have a trust deed that specifies she gets her £25k back. So if you should sell the mortgage would be settled, she would get her £25k and then the remaining equity would be split according to your percentages of ownership.

Zeebs90

We are in a similar position, although we will be mostly contributing equally to the mortgage. We have had a deed of trust drawn up (a condition of the gift from my parents) that says should we sell the house the deposit will be returned to me and then once the mortgage has been paid off any equity will be split equally - I don't see why you couldn't have the same drawn up also reflecting the split in the mortgage payments meaning you would get back the share you have paid once the deposit has been returned and the mortgage paid off.

smile88egc

I'll be doing the same with my partner since I have a deposit saved and he doesn't and I earn more. If we waited until we had equal depositcontributions we'd be waiting another 5 years. If we then made equal contributions, our mortgage term would need to be 5 years longer.

Those saying you need to get married need to get with the times, this is 2016!

Tenants in common and a deed of trust is a good solution

Pixie5740

I am well aware it is 2016 but 21st century or not married couples still have far more rights and protections than their unmarried counterparts.

AnotherJoe

Pixie5740 wrote: »

I am well aware it is 2016 but 21st century or not married couples still have far more rights and protections than their unmarried counterparts.

But they can get those with the appropriate agreements made up front.

I would keep it simple, the GF's parents are contributing the money so its their their right to put whatever conditions they want and OP (and GF) can accept those or walk. Getting that back if they split up seems fair to me, suppose he runs off with some floozy after a week, why should he get half of it?

However, after that, I would strongly say it should be 50/50 remaining equity irrespective of the contribution because what the heck are you doing buying together & living together if you are going to manage the finances like that? Will you have notes on the fridge regards who bought what food? Will she get an extra 2% if she cleans the bathroom every week?

Its a partnership not a couple of mates doing it for financial reasons only, and starting off on an unequal basis like this bodes very badly IMO,and leads to stuff you'll regret saying like "well its mostly my house now so we arent decorating the lounge bright red" or whatever. You dont want one person to be the "junior" partner.

Pixie5740

AnotherJoe wrote: »

But they can get those with the appropriate agreements made up front.

I would keep it simple, the GF's parents are contributing the money so its their their right to put whatever conditions they want and OP (and GF) can accept those or walk. Getting that back if they split up seems fair to me, suppose he runs off with some floozy after a week, why should he get half of it?

However, after that, I would strongly say it should be 50/50 remaining equity irrespective of the contribution because what the heck are you doing buying together & living together if you are going to manage the finances like that? Will you have notes on the fridge regards who bought what food? Will she get an extra 2% if she cleans the bathroom every week?

Its a partnership not a couple of mates doing it for financial reasons only, and starting off on an unequal basis like this bodes very badly IMO,and leads to stuff you'll regret saying like "well its mostly my house now so we arent decorating the lounge bright red" or whatever. You dont want one person to be the "junior" partner.

It's either a gift or it's not. If the parents want to give a gift to their daughter then it's down to their daughter what she does or doesn't do with it.

Why is it fair that the gf gets back what she puts in but not the OP? As you say, it's either a partnership or it isn't. Sauce for the goose and all that.

Edit: A Declaration of Trust still doesn't give both parties the same rights and protections as married couples.

AnotherJoe

Pixie5740 wrote: »

It's either a gift or it's not. If the parents want to give a gift to their daughter then it's down to their daughter what she does or doesn't do with it.

That is a false dichotomy "either a gift or not". No reason it cant be a gift with a condition attached. GF certainly isn't free to do what she wants with it in the first place, Its for a house (not a Ferrari or a foreign holiday ) so that's one condition, and the second condition is, ring fence it from BF. They can specify any conditions they want.

Pixie5740 wrote: »

Why is it fair that the gf gets back what she puts in but not the OP? As you say, it's either a partnership or it isn't. Sauce for the goose and all that.

Because the GF didnt put it in, her parents did. So thats why its fair as it brings a third party into play and they can stipulate whatever they want. "BF must dress like a chicken every third Wednesday of the month"

And bf certainly would be free to specify he gets back what he puts in but then that's a difficult (impossible) percent to calculate because if you go down that route, apart from being a terrible basis for a relationship, its not just money. Lets say they have kids and he ends up looking after them whilst she goes out to work, does his contribution for looking after the kids get financial recognition and affect the percentage? Suppose he also cooks dinner 5 time a week, is that recognised? Impossible and setting up to fail.

Hence 50/50 on everything they each put in, but if someone else puts equity in, lets say I was feeling generous and giving a gift with strings, I am entitled to make any condition I want, say if they split that I want it back, or that only she gets it, or its left to the local cats home.