Unequal Shares Advice.

RJeff

I'm contributing £5000 towards the mortgage. My partner is contributing £20000 towards it. The purchase price is £140,000. We will be splitting the mortgage payments and bills 50/50.

Please can I have your recommendations as to how our trust deed should go?

I thought if we sell the property, we both get our deposits back and split the rest 50/50 but what happens if we split up and we both agree to sell the property? What happens if we split up but my partner wants to stay in the property? How does it all work in terms of shares/splits etc?

What would your recommendations be for our shares in the property?

I find this all very confusing so please answer in layman's terms:!!!129315;!!!129315;!!!129315; looking forward to your assistance.

pink_pirlie

We did ours-
5% of 30% of sale price partner A
95% of 30% of the sale price parter B
Remaining funds after mortgage repaid and expenses to be split 50/50.

We didn’t say anything about what would happen if one or the other wanted to stay in the house if we split as it’s likely the property would be sold. my partner is not originally from the U.K. and only moved here to allow the relationship to continue. He would go back to his birth country if we broke up and I wouldn’t be able to afford the property on my own.

I would discuss what you would want to do in that scenario and explain it to your solicitor. I’m sure they can write it how you want and give you advice specific to your scenario and thoughts.

Thrugelmir

RJeff wrote: »

I thought if we sell the property, we both get our deposits back and split the rest 50/50 but what happens if we split up and we both agree to sell the property? What happens if we split up but my partner wants to stay in the property? How does it all work in terms of shares/splits etc?

Then the partner that remains will need to buy the other out. You would need to agree on the mechanism for valuation of the property.

DOT's still need to be enforced through the courts. So think carefully before making yours too complex at great expense. As the basic division of the equity is a sufficient base point. Should court be the outcome. Majority of people suffer from having no agreement at all.

Remember to draw up wills as well!

Tom99

[FONT=Verdana, sans-serif]Your DOT needs to take into account the full cost of purchase incl all fees, stamp duty etc. So assuming £140k includes these costs your partner is buying 10.7% more of the equity than you ((20-5)/140= 10.7%. Everything else is split 50/50

[/FONT] [FONT=Verdana, sans-serif]So the simplest DOT might say:

[/FONT] “[FONT=Verdana, sans-serif]On the sale of the property the proceeds after sale costs and discharging the mortgage will be split:

[/FONT] [FONT=Verdana, sans-serif]Partner: 10.7% of the gross sale price less sale costs plus 50% of the remainder.

[/FONT] [FONT=Verdana, sans-serif]You: 50% of the remainder”

[/FONT] [FONT=Verdana, sans-serif]If you sell or one buys the other out you can use the above formula. If one stays and one leaves but you still both own the property and the future mortgage payments are no longer 50/50 then you would need to update the DOT at that point.[/FONT]

getmore4less

The two standard ways are the get your money bag and split mortgage 50:50 or equitable shares.
get your money back
is the equivalent of an interest free loan from of 1/2 you each out in to the other so with a £5k £20k input it's like your OH lending you £7,500 interest free till you sell/split.

the buyout means the person leaving gets half after the mortgage and £25k is take off + their input back.

equitable shares.
£5k buys a share
£20k buys a share
mortgage buys the rest being paid 50:50
That way you own 1/2 the mortgage + a bit
in the £5k, £20k, £115k thats works out at £62,500:£77,500 or 44.64% 55.36%
you each get your % back and split the 50:50 from your shares
(you don't take the mortgage off first)

A variation on the equity one is
own 50:50 and adjust the mortgage

this way you adjust the amount of mortgage from 50:50 to a split that makes the share of the mortgage + your input 50%

you shares of the £115 mortgage would be £65k the OH £50k
that way you are both investing £70k through cash or servicing debt.

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If you have the cash flow then option 1 or 3 could work as you pay back the £7,500(virtual) loan or overpay your share of the mortgage.

owning 50:50 is clean as any capital put into the property is also 50:50 that for anything to do with the house like improvements,maintenance etc.

living running costs are separate.

In the equity share version the house costs should be split at the ownership % to keep it clean

The get your money back is the easiest to understand and implement once you are clear it is just a temporary loan.


NOTE
As Tom points out the starting number is including all the costs of purchase and the end point is net proceeds from a sale.

This does mean that there is a shortfall from day one as you cannot recover the costs. each methods splits those costs differently with the equity version being the fairest.

AnotherJoe

Or, money back simple version uplift the original deposits by the value the house has increased or decreased. Eg if the house doubles in price, you get back £10k, partner (ex partner !) £20k, then split everything else