Splitting stamp duty with an unequal share co-owner

Elo_C_09

saajan_12 wrote: »

The key is what you both want, and we the shares can be made to work accordingly.


Okay, so you want the money to work for you, ie not give an interest free loan of your deposit.

Now do you want a specific share of equity at the end of the day or do you want equal mortgage payments?

1) For 50/50 ownership
Total cost of property = £370k + say 10k costs = £380k so each person needs to contribute £190k.

You have £85k deposit and £105k of the mortgage.
Partner has £0 deposit and £190k of the mortgage.
You pay 105/295 = 36% of the mortgage payments
Partner pays 190/295 = 64% of the mortgage payments.

Any repairs, further borrowing, overpayments etc paid 50/50.

2) For 50/50 mortgage payments
You contribute £85k deposit + £147.5k mortgage = 61.2% of property
Partner contributes £147.5k mortgage = 38.8% of property.

If partner then overpays, the calculation needs to be done again.

Thank you, that's so helpful. I suppose both of these work out the same in the end - just with different ways of getting there and also I guess option 'A' would allow me to have some disposable income immediately, should I need it.

Once again, I really appreciate everyone's help.

Best wishes, El

Tom99

saajan_12 wrote: »

The key is what you both want, and we the shares can be made to work accordingly.
Okay, so you want the money to work for you, ie not give an interest free loan of your deposit.
Now do you want a specific share of equity at the end of the day or do you want equal mortgage payments?

1) For 50/50 ownership
Total cost of property = £370k + say 10k costs = £380k so each person needs to contribute £190k.

You have £85k deposit and £105k of the mortgage.
Partner has £0 deposit and £190k of the mortgage.
You pay 105/295 = 36% of the mortgage payments
Partner pays 190/295 = 64% of the mortgage payments.

Any repairs, further borrowing, overpayments etc paid 50/50.

2) For 50/50 mortgage payments
You contribute £85k deposit + £147.5k mortgage = 61.2% of property
Partner contributes £147.5k mortgage = 38.8% of property.

If partner then overpays, the calculation needs to be done again.

You still need a two part formula to put either of the above options into practice. Say you break-up after a year and the house is sold. You would not expect party B who made no in initial contribution to get either 50% or 38.8% of the equity.

In the above examples the property will only be owned 50%/50% or 61.2%/38.8% once the mortgage is paid off.

Elo_C_09

Thanks Tom99 - yes, that is a good point. Is this what you mean about a the second part of the formula when you say this?

"On the sale of the property and after paying the sale costs and redeeming the mortgage the proceeds of sale shall be split as follows:
Party A – 20.5% of the gross sale price less costs of sale
The remainder – Split 50%/50% between Party A and B"

Tom99

Elo_C_09 wrote: »

Thanks Tom99 - yes, that is a good point. Is this what you mean about a the second part of the formula when you say this?

"On the sale of the property and after paying the sale costs and redeeming the mortgage the proceeds of sale shall be split as follows:
Party A – 20.5% of the gross sale price less costs of sale
The remainder – Split 50%/50% between Party A and B"

Yes as you can see its a two part formula, you get back 20.5% of the gross sale proceeds (less costs of sale) then whats left as the remainder of the net proceeds you split 50/50.
That way your initial contribution is protected.

Elo_C_09

Thank you, this all makes sense.

Much appreciated all.

saajan_12

Tom99 wrote: »

You still need a two part formula to put either of the above options into practice. Say you break-up after a year and the house is sold. You would not expect party B who made no in initial contribution to get either 50% or 38.8% of the equity.

In the above examples the property will only be owned 50%/50% or 61.2%/38.8% once the mortgage is paid off.

No, the shares are mention are ALWAYS the correct share of property sale price.

The mortgage is separate and the balance should be paid off in the same proportion as the monthly mortgage payments, out of each person's share of the equity / other outside funds.

Elo_C_09

So...

If:
I have £85k deposit and £105k of the mortgage.
Partner has £0 deposit and £190k of the mortgage.
I pay 36% of the mortgage payments
Partner pays 64% of the mortgage payments.

THEN - upon sale, if for arguments sake it's in profit:

I get 85k and I pay off 36% off the balance
Partner pays off 64% of the balance
The profit is split 64% to me and 36% to him?

Tom99

saajan_12 wrote: »

No, the shares are mention are ALWAYS the correct share of property sale price.
The mortgage is separate and the balance should be paid off in the same proportion as the monthly mortgage payments, out of each person's share of the equity / other outside funds.

[FONT=Verdana, sans-serif]The mortgage will be a joint mortgage and will be paid off from the sale proceeds leaving the joint owners with the net sale proceeds to divi up according to the deed of trust.[/FONT]

[FONT=Verdana, sans-serif]But you could express the split formula using your approach:[/FONT]

[FONT=Verdana, sans-serif]'On the sale of the property and after paying the sale costs and redeeming the mortgage the proceeds of sale shall be split as follows:
Party A – 50% of the gross sale price (less costs of sale) less 36% of the mortgage redemption figure.
Party B – 50% of the gross sale price (less costs of sale) less 64% of the mortgage redemption figure.'[/FONT]

[FONT=Verdana, sans-serif]The net result will be the same.[/FONT]

getmore4less

Elo_C_09 wrote: »

So...

If:
I have £85k deposit and £105k of the mortgage.
Partner has £0 deposit and £190k of the mortgage.
I pay 36% of the mortgage payments
Partner pays 64% of the mortgage payments.

THEN - upon sale, if for arguments sake it's in profit:

I get 85k and I pay off 36% off the balance
Partner pays off 64% of the balance
The profit is split 64% to me and 36% to him?

That is the own 50:50 case

you get 1/2 each BEFORE the mortgage is paid off

THEN you pay off your shares of the outstanding mortgage.

Elo_C_09

Gosh, sorry I am obviously getting a bit wrapped up.

So this way would work and still make my money work for me. This is the equity split way and 1 of your 2 variations you mention near the top of the thread.