Deed of trust formula help

Anthony15

Hi everyone,

My partner and I are buying our first home and are setting out a Deed of Trust.

I'm contributing the majority of deposit but my partner will be paying a greater share of the mortgage on a monthly basis and possibly in overpayments too. We would like to propose the following formula to our solicitor:

Partner A's Share: (Initial deposit contribution + sum of of their mortgage payments and overpayemnts + contriubtion to fees paid on completion + payments for repairs and rennovation) ÷ (Total deposit + total mortgage payments and overpayments + total fees paid on completion + total payment for repairs and rennovations) *100

Partner B's Share: (Initial deposit contribution + sum of of their mortgage payments and overpayemnts + contriubtion to fees paid on completion + payments for repairs and rennovation) ÷ (Total deposit + total mortgage payments and overpayments + total fees paid on completion + total payment for repairs and rennovations) *100

I believe above will calculate each of our percentage shares based on what we have individually contributed? Any help or comment would be really appreciated! Thank you!

P.S. I realise the above all seems very clinical and un-romantic.. we're actually quite relaxed about money and share expenses between us, I just figure if we're going to set out a Deed of Trust we may as well make the formula a good one!! Hopefully we'll never make use of it anyway

eddddy

Realistically, if you have an acrimonious break-up in 5 or 10 years time - how will you add all this up?

Especially stuff like 'Payments for repairs and renovation'. (e.g. "I paid a plumber £100 cash to unblock the toilet 4 years ago" etc)

Or would you keep monthly accounts which are signed and witnessed each month - so that they cannot later be disputed in court!!!


It might be easier to say something like "Based on deposit contribution, Partner A owns 60% and Partner B owns 40%."

And going forward, Partner A pays 60% of mortgage payments, costs etc and Partner B pays 40%.

Anthony15

Thanks, sorry I meant to say that we’d only include repairs and renovations over £1000z but I see your point...

For the sake of simplicity it might be easier to remove repairs/renovations altogether? Although if a few years down the line one of us has the means to pay £10K for a new kitchen then maybe e si’ll wish we included it.

I like what you suggested however, it ties us in to uneven mortgage payments moving forward. Although my partner ears a lot more than I do at the moment if we have children in the future things may change.

Thanks again for your response

[Deleted User]

why not keep it basic? 'we get our deposit back plus half of equity on sale minus fees'

£1000 of renovations will be swallowed up by hopefully the increase in value over the coming years.

getmore4less

Far to complicated and you don't count mortgage payments like that because that will get the wrong answers.

Read through some of the thread on how to do it.


start with the total to buy the place inc all the fees

That's the starting number

easiest from there is to work on a get your deposits back model where you lend the OH 1/2 your extra put in.

get your deposit back may work.

you own the place 50:50 pay for stuff 50:50

In effect lend the OH 1/2 the extra money you put in.

You pay equal on the house(mortgage, refurb etc.) and on the side they pay you back on agreed terms.

keeps it very simple and easy to understand.

eg house £300 you deposit £100 OH depoit £0 mortgage £200.

You pay 1/2 the mortgage each and the OH owes you £50k
they pay back in instalments and on a sale you get the rest from their 1/2 of the equity.


The other main option is equity
using same numbers if you pay the mortgage 50:50 you own 2/3 OH 1/3

to make the ownership 50:50 you pay 25%(50k) the OH 75%(£150k)

maintenance etc is done at the equity %,
overpayments change the debt not he ownership that stays constant.


Some real numbers may point to one option being more practical in the long run.

Especially the longer term cash flow when you want to spend money onthe place can you make that equal without an imbalance.

getmore4less

OK given the imbalance in income but you being "cash rich".

Would the loan method work?
basic outgoing equal with your income is supported by the OH paying you back the deposit money quickly giving you your cash pot to contribute to the new kitchen etc?

Thrugelmir

Anthony15 wrote: »

For the sake of simplicity it might be easier to remove repairs/renovations altogether? Although if a few years down the line one of us has the means to pay £10K for a new kitchen then maybe e si’ll wish we included it.

Kitchens depreciate in value. Only limited lifespan.

eddddy

Anthony15 wrote: »

Although my partner ears a lot more than I do at the moment if we have children in the future things may change.

Hmmm... be careful where you go with that.

A lot of people might say that if one partner is working to bring in the money, whilst the other partner is raising the children, they are both making equal contributions to the household.

Suggesting that the partner raising the children should own less of the house as a result might be a little contentious.

eddddy

Anthony15 wrote: »

Although if a few years down the line one of us has the means to pay £10K for a new kitchen then maybe e si’ll wish we included it.

So I guess you should take into account 'the time value of money' - as economists say.

• Partner A pays £10k towards the deposit in 2019 (when the house is worth, say, £200k. i.e. 5% of the house's value)

• Partner B pays £10k towards a fitted kitchen in 2024 (when the house is worth, say, £240k. i.e. 4.2% of the house's value)

e.g. If you break up in 2025, you should expect to get back more for £10k paid in 2019, than you would for the £10k paid in 2024.


It really does become a big can of worms!!!

Anthony15

Thanks all, really helpful.

Point taken on the "time value of money" in my initial formula that wouldn't take it into account. We've decided between us that my deposit money (I'm paying the entire deposit) should appreciate (or depreciate) with the value of the house so....

On sale, I would get back 10% of sale price, then we split our remaining equity according to the share of the mortgage we've individually paid.

We will probably split the mortgage 60/40 or 65/35. So I'd get back 10% of the sale price, then 35% or 30% of the remaining equity after fees etc.

If our conveyancer isn't happy with this, then the loan option could work too, thanks. Although we'd then probably have to outline a separate loan agreement which feels like a bit of a faff, especially given that we fully expect to get married in a few years. Thanks again all!

Tom99

Anthony15 wrote: »

If our conveyancer isn't happy with this, then the loan option could work too, thanks. Although we'd then probably have to outline a separate loan agreement which feels like a bit of a faff, especially given that we fully expect to get married in a few years. Thanks again all!

[FONT=Verdana, sans-serif]Your conveyancer/mortgage co are not going to be bothered how you split the beneficial interest so use whatever formula you like.[/FONT]
[FONT=Verdana, sans-serif]Make sure your deed of trust defines in an unambiguous way all of the terms you use eg mortgage payment, overpayment etc.[/FONT]
[FONT=Verdana, sans-serif]Are you going to pay someone to draft this deed?[/FONT]