First Time Buyers, Tennants in Common, Trust Deed advice....

getmore4less

Should also add whatever algorithm you come up with test it, just because it might look sensible doeas not mean it is.

Many people thing the get your deposit back is OK but don't understand that it is in effect an interest free loan.
Fine for a few £1k but if it is 30% of the house value it can make a massive difference

getmore4less

Guest101 wrote: »

Never understood why these aren't called deeds of mistrust.

Clearly one taking out such a deed doesn't trust their significant other to act respectably.

It's more about documenting what tha understanding of reasonable is.

If you can't sit down and discuss and document what you think is sensible then there is a bigger problem before you start.

The its all going well scenario is the easy bit, its the not going well bits that need thinking about and many don't till its too late.

50:50 is great start but what happens when one of us loses our job or dies...

Guest101

getmore4less wrote: »

It's more about documenting what tha understanding of reasonable is.

If you can't sit down and discuss and document what you think is sensible then there is a bigger problem before you start.

The its all going well scenario is the easy bit, its the not going well bits that need thinking about and many don't till its too late.

50:50 is great start but what happens when one of us loses our job or dies...

I think that's slightly different to


"if things don't go well I think you'll go after my money"

getmore4less

Adam182 wrote: »

The remaining % of the house would then be split at a percentage at which each of us had invested into the property through things such as mortgage/maintenance, for instance if we both paid the mortgage at 50/50 and any maintenance costs the same 50/50 then the remaining percentage of the house sale value would also be split 50/50.

picking up on this bit.

When you say mortgage payments what do you mean?

lets run through a scenario

You have a mortgage £100k @2.5% for a year paying £250pm each.

at month 4 one of you pays for a £10k kitchen
at month 8 the same person pays £10k off the mortgage.

Then you want to split at month 12

That £100k part of the house is now worth £125k
how would your algorithm work out what you each owe and how much you get back.


Here is a calculator so you can workout what the mortgage will be at each month.
http://www.whatsthecost.com/mortgage.aspx
set to interest only with a payment of £500 and a term of 1 year.

if you keep the payments the same at month 9-12 the end owing at month 12 will be £86,376.

steampowered

If you were to split up, it might be difficult to go back through bank statements etc. to work out exactly how much each person has spent on the mortgage.

It would be even more complicated if you start counting bills and maintenance. For example does buying the weekly shop count towards a share of the property?

It might be simpler to say that each person gets their deposit contribution back first, and the remaining equity is split 50/50, and you each pay half of the mortgage.

Adam182

Again thanks for all the fantastic advice everyone, we are thinking of adjusting our initial idea from the OP in light of everyones advice. These are our new thoughts.

One pays less of the deposit to free up more cash for their part in the required maintenance to the property (the property needs updating so 20k will need to be spent without a doubt over a period of most likely year 1) so...

Deposit -

A = 20k B = 5k on a property sale of £153k

= mortgage of 128k

Remaining debt (mortgage only) is split 50/50

The deed of trust will state each person gets their deposit share back at the % it initially was paid A = 13.1% B = 3.3%

The remaining money from the sale is split 50/50

---

Does that sound any better?
Would it be possible to have the mortgage payments ''floating'' instead or will that bring in the same complications as before?

Any utility bills / renovation we will do completely separately and try to keep it as close to 50/50 as possible but will not factor into any equity/repayment etc. It will not even be part of the trust deed.

Again any further feedback is greatly appreciated - Adam

steeeb

Protecting the deposit (Whether is being an amount or a percentage) and then splitting 50/50 after that and contributing to maintenance/utilities/renovation somewhat equally sounds fair.

You don't need to both split everything down the line 50/50. She could pay for materials for the house, you could pay for the shopping, she could receive an inheritance and you use some savings to build an extension etc.


When I bought with my then g/f we split it 99% (me) -> 1% (her) - I contributed all the deposit, all maintenance/bills/renovation/living costs to the property (she was unemployed). We then had a child, got married and another on the way. We're nearly exchanging on a property as joint tenants using the equity etc from our first property (she's now a full time mum).

getmore4less

Adam182 wrote: »

Again thanks for all the fantastic advice everyone, we are thinking of adjusting our initial idea from the OP in light of everyones advice. These are our new thoughts.

One pays less of the deposit to free up more cash for their part in the required maintenance to the property (the property needs updating so 20k will need to be spent without a doubt over a period of most likely year 1) so...

Deposit -

A = 20k B = 5k on a property sale of £153k

= mortgage of 128k

Remaining debt (mortgage only) is split 50/50

that means you own the place at 84:69 or 54.9% 45.1%

The deed of trust will state each person gets their deposit share back at the % it initially was paid A = 13.1% B = 3.3%

The remaining money from the sale is split 50/50

---

Does that sound any better?
Would it be possible to have the mortgage payments ''floating'' instead or will that bring in the same complications as before?

Any utility bills / renovation we will do completely separately and try to keep it as close to 50/50 as possible but will not factor into any equity/repayment etc. It will not even be part of the trust deed.

Again any further feedback is greatly appreciated - Adam

You are still mixing maintenance(ownership costs)etc with the normal bills and the mortgage and not at the ownership % which is based on the deposit and the debt being serviced.

keep the 3 separate, ownership, debt, day to day.

In the above how are you funding the £20k upgrades if you have that cash available between you might be better to include it in the purchase(£173k) and have it set aside as the slush fund to do the work.

You are so close to owning 50:50 I would consider adjusting the debt to make the ownership 50:50

edit:

Even if one of you does not have the immediate cash for the refurbish but will have it during the process it can be counted at the beginning as part of the deposit.

eg you have £25k deposit and need £20k so if by the time you have finished the work between the deposits and cash input you do £22.5k each thats 50:50. you could even up the virtual pot to include some extra for future work.

This moves away from strict equity/cash accounting on the ownership side but does make the numbers very easy to work with.

Adam182

Hmm I'm feeling lost at this stage.... I know you must be right, im just trying to understand how to make sense of it so i understand why.

My thinking was that because A can bring more money to the table than B it would be a good idea to use some of that extra money to put down a larger deposit and lower the LTV. This would be provided that the extra money was secure (in a deed of trust) and would be returned in the event of a split.

This would also benefit B in that they havn't used all their money on a deposit, and have the money in the bank to put towards their half of the 20k renovation costs over a period of time, or even use some for a holiday if one came about.

Doing it this way would (in my mind) mean that renovations can take place straight away as both A and B would have the money to fund their half of the costs.

Doing it the other way and having both A and B splitting the deposit 12.5k each, would leave A with left over cash to renovations but leave B not much left for their half. In this scenario if A then went ahead and covered the renovation of 20k (lets say the money was taken and the renovation only took a day) and then a split occurred the next day it would mean B (if they wanted to) cold still demand their half regardless of A paying the extra 20k.

---

Using my figures before of A putting in a 20k deposit and B putting in 5k on a house sale of £153k and your figure of that equalling A owning 54.9% and B owning 45.1%.

If then EVERYTHING is split at A pays 54.9% and B pays 45.1% of all expenses (mortgage/renovation) as tennants in common, does that work out fair?

Thanks again, its very much appreciated.

Adam182

Actually using the above scenario would it be the person who paid less on the deposit who would pay more on the mortgage.