Gifted deposit and protecting contribution.

davidmcn

AnotherJoe wrote: »

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.

Not any conditions which they'd legally be able to enforce though. It'll be the couple's money to do with as they please.

Pixie5740

AnotherJoe wrote: »

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.

What exactly could they do if their daughter decided to take the money and go and buy a Ferrari? Jack !!!! really.

AnotherJoe wrote: »

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.

It's not an impossible calculation and if one of them wishes to be a stay-at-home parent without the benefit of being married then that's the risk he or she will take.

What's yours is ours and what's mine is mine? Is that a better basis for a relationship?

Marvel1

It's scenarios like this I'm glad I live alone and property in my name alone and no money from Mammy and Daddy, too much hassle.

What happens if the property went down in value? She gets £25,000?

Homeowner2be

Thanks for all your comments and some very good points made,

I agree that it's not just the money that will count as a contribution to the house and simple mortgage payments can't possibly reflect what one person has invested.

However it seems if we are able to get this money (which would be a great help) my girlfriends dad needs to be confident that if we are to break up then his daughter won't be left with significantly less than she has put in to start with.

It's not ideal and certainly not what I had expected to do but I think I've come up with a solution and wanted to get your views on it.

The one issue I have is that I seem to be the only one to lose out if we are to split everything 50/50 after she has received her 25k deposit back as I'll be paying allot more each month. So let's say we have a 100k house and she's put in 25k deposite + 10k payments and I've paid 65k, at the end of it she would get 25k plus 37.5k and I get the same but would be almost half my investment. I can't accept this.

My idea is is that instead of 25k she will simply own a percentage of the house what ever 25k gets her e.g. 250k house =10%. Which can increase and decrease in value depending what the sale value of the house would be.
We will own the house as tenants in common and I receive the a percentage that would reflect the amount I pay each month. This way I will get back what I pay in if we are to split up.
This isn't a great deal for her in the long run as I had planned for it all to be 50/50 anyway despite me paying more each month. As said before simply making payments shouldn't reflect the other contributions made to the house.

Does this sound like it would be a good idea?

Thanks again.

franklee

Homeowner2be wrote: »

My idea is is that instead of 25k she will simply own a percentage of the house what ever 25k gets her e.g. 250k house =10%. Which can increase and decrease in value depending what the sale value of the house would be. We will own the house as tenants in common and I receive the a percentage that would reflect the amount I pay each month. This way I will get back what I pay in if we are to split up. This isn't a great deal for her in the long run as I had planned for it all to be 50/50 anyway despite me paying more each month. As said before simply making payments shouldn't reflect the other contributions made to the house.

Does this sound like it would be a good idea?

Not for her especially short term.

Rough back of an envelope figures:
House 250K
Deposit from GF's parents 25K
For an example let's say you pay 66% of the mortgage, she pays 33%.
So I think you would then suggest percentages 60% you, 30% her, 10% deposit which adds up to 60% you, 40% her.

Say mortgage is 3%, so say £1,070 per month using the MSE mortgage calculator.
An example say the house is worth 300K after 2 years when you split up.
Remaining debt after 2 years 212K using the MSE mortgage calculator,

Ignoring fees etc. the "profit" from the sale is 300K-212K=88K
You walk with 60% which is 53K
She walks with 40% which is 35K

Total mortgage paid over the two years 1070*12*2=25680 so approx. 25,500.
You paid 66% approx. 17,000.
She paid 33% approx. 8,500 plus the 25K deposit from her parents.

So if I understand your proposal,
You contribute 17K and walk with 53K
She contributes 33.5K and walks with 35K

So if prices rise you gain hugely compared to your input. I guess it works in reverse in prices fall as you will shoulder a greater portion of the loss but that's still going to be eclipsed by the large deposit put in up front which will get wiped out. So heads you win and tails she loses. Obviously you can adjust the figures to suit your real life ones but basically you are benefiting from the deposit money as leverage.

That's before we even consider all the other bills and fees involved and usual household expenses.

Over time it evens out but that could take years and once you've been in it together for years then surely there should be a partnership going on.

What I think you should do is to protect her parent's investment that is allowing you both to buy at all and then share the remaining risk/reward. If that 25K wasn't on the table then you would presumably have to rent so you are saving the rent money and having the chance to pay your own mortgage. Either that or rent and save your own deposit. If your relationship is flaky then buying together isn't a good idea anyway.

[Deleted User]

If the situation remains completely unchanged, then I guess so.

But what happens if one of you stops working for some reason, what if she gets a better job.., maybe even eventually earns more than you? What if you have a child/children? Do you just keep visiting a solicitor?

What if she does more housework than you - are you going to have a list of chores stuck up in the house to make sure you both do 50% of the household stuff? What value is applied to that if its not 50% share of chores - or is there no value? Its not always true but it tends to be that a person earning more money does more hours and so therefore is less available for the 'house stuff'. But I should imagine you aren't giving any value to that. If true.., that does reveal a few things as to how valued this gf is. I feel rather sorry for her.

Protect yourself by all means but it seems to me It would be giving me a rather unpleasant view of a person's character and probably why her parents are trying to protect their money. You admit that your solution probably isn't very fair to your gf.., and yet its what you can 'go for' and you are going for this at the start when its supposed to be all love and glory and wanting only good for the other partner in the relationship? That would really really concern me.

No back pats from me, I'm afraid. I am just hoping your gf or her parents come across this thread.

getmore4less

You don't use the mortgage payment you use the % of the debt you are servicing to determine your equity.

What you could do is skew the equity or just use the method till you got to 50:50.

Franklee case is flawed because it uses the actual mortgage payments which is the wrong way to do it.

If the £25k was a loan at 10% redo the numbers taking that payment into account.

AnotherJoe

Pixie5740 wrote: »

What exactly could they do if their daughter decided to take the money and go and buy a Ferrari? Jack !!!! really.

Not so. The parents can arrange it so that the gift-with-strings is given to solicitor who uses it as part of finance for the house and will keep it away from the Ferrari dealership. That's what I did when I gave an open ended loan-with-strings for a very similar situation. So, maybe we are getting hung up on the word "gift" here and what the gf's parents wish to be accomplished can be done by making it a loan with no repayments needed (in which case the pool of lenders is diminished)

AnotherJoe

Homeowner2be wrote: »

Thanks for all your comments and some very good points made,

I agree that it's not just the money that will count as a contribution to the house and simple mortgage payments can't possibly reflect what one person has invested.

but nevertheless you ignore those intangibles amd simple mortgage payments is effectively exactly what you then try to set up with your solution following here ...

It's not ideal and certainly not what I had expected to do but I think I've come up with a solution and wanted to get your views on it.

<snip>

My idea is is that instead of 25k she will simply own a percentage of the house what ever 25k gets her e.g. 250k house =10%. Which can increase and decrease in value depending what the sale value of the house would be.
We will own the house as tenants in common and I receive the a percentage that would reflect the amount I pay each month. This way I will get back what I pay in if we are to split up.
This isn't a great deal for her in the long run (No **** Sherlock )as I had planned for it all to be 50/50 anyway despite me paying more each month. As said before simply making payments shouldn't reflect the other contributions made to the house. So why haven't you done that then???

Does this sound like it would be a good idea?

Thanks again.

It sounds like an awful idea for her financially and for both of you from a relationship POV where you will always hold the purse strings and despite saying you want it to be 50/50 create a skewed situation from the get go.

I think your attitude bodes really badly for the future of this relationship as the two recent posters have said. (Deanna and Frank). You have set the situation out as if you were a couple of mates sharing a house for economic reasons, not a couple.

HappyMJ

Homeowner2be wrote: »

Thanks for all your comments and some very good points made,

I agree that it's not just the money that will count as a contribution to the house and simple mortgage payments can't possibly reflect what one person has invested.

However it seems if we are able to get this money (which would be a great help) my girlfriends dad needs to be confident that if we are to break up then his daughter won't be left with significantly less than she has put in to start with.

It's not ideal and certainly not what I had expected to do but I think I've come up with a solution and wanted to get your views on it.

The one issue I have is that I seem to be the only one to lose out if we are to split everything 50/50 after she has received her 25k deposit back as I'll be paying allot more each month. So let's say we have a 100k house and she's put in 25k deposite + 10k payments and I've paid 65k, at the end of it she would get 25k plus 37.5k and I get the same but would be almost half my investment. I can't accept this.

My idea is is that instead of 25k she will simply own a percentage of the house what ever 25k gets her e.g. 250k house =10%. Which can increase and decrease in value depending what the sale value of the house would be.
We will own the house as tenants in common and I receive the a percentage that would reflect the amount I pay each month. This way I will get back what I pay in if we are to split up.
This isn't a great deal for her in the long run as I had planned for it all to be 50/50 anyway despite me paying more each month. As said before simply making payments shouldn't reflect the other contributions made to the house.

Does this sound like it would be a good idea?

Thanks again.

Does it sound like a good idea to me?

No....

When you're in a relationship you jointly earn money. All money earned by either person is "our" money...that includes all the benefits you get as well. You're saying you will be making the payments from your income so therefore should be entitled to more of the house once it's sold. You need to change that to "we" will jointly be making the payment each month from "our" joint income.

My suggestion....refuse the gift. Say to her father thanks but I cannot accept the conditions so whilst I appreciate the offer I cannot accept the gift.

If he wishes to give his daughter £25,000 then she could leave the sum in an offset savings account to reduce the mortgage interest payable and if she does leave the relationship she has £25,000 in her savings account she can leave with until you come to a mutual agreement as to what to do with the equity you've built up in the property.