Uneven deposit and equal mortgage repayments

Tom99

Bentil2019 wrote: »

Thank you Tom99

Your maths make the most sense and I think this is what we proceed with.
Question- why do we need to include the buying fees? We were going to split these 50/50.

Because the fees are just as much a part of your initial 'deposit' for DOT purposes as the deposit itself.
Let's say using your example above that the cost is £250,000 plus £10,000 fees.
You are paying £2,500 plus £5,000 fees so 7.5/260=2.88% of the £260k total.
You partner is paying £22,500 plus £5,000 so 27.5/260=10.58%
So your partner is paying for 10.58% less 2.88% = 7.7% more than you rather than the 8% more than you if you were to ignore costs.

FTBAngst

boo_star wrote: »

If you're arguing over petty crap like that, perhaps you shouldn't buy a property together.

20,000 is hardly ‘petty crap. I think more couples need to have this conversation before they pool their assets. So many just expect everything to end in happily ever after and are horribly unprepared when things need to be split

cybervic

Tom99 wrote: »

You need a deed of trust with a two part formula, you cannot jump straight to a fixed percentage 40/50, 90/10 or whatever.
Since your partner is buying 8% of the house upfront more than you, but apart from that you are splitting the costs 50/50, then the deed of trust could say:

'[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:[/FONT] [FONT=Verdana, sans-serif]Party A – 8% of the gross sale price less costs of sale[/FONT]
[FONT=Verdana, sans-serif]The remainder – Split 50%/50% between Party A and B[/FONT]

[FONT=Verdana, sans-serif]The above formula will work whether you sell on day 2, after 5yrs or when you have paid of the mortgage. When working out the initial deposit contributions use the full costs of purchase including all fees etc not just the basic price.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]If you were to sell at £260k then using the above formula you will get £7,100 as you expected.
[/FONT]

If OP and the partner are splitting all cost/payment 50/50, then there is no need to use floating deed (i.e. the one with pre-defined formulae), because it'll end up the same as normal deed of trust with fixed percentage. OP can discuss with partner whether to include buying cost in the percentage though but once that's decided then fixed percentage would be fine.
We didn't include buying cost in our case as we felt it complicates things and there'll be no stop into what to add into the list of buying cost.

Tom99

cybervic wrote: »

If OP and the partner are splitting all cost/payment 50/50, then there is no need to use floating deed (i.e. the one with pre-defined formulae), because it'll end up the same as normal deed of trust with fixed percentage. OP can discuss with partner whether to include buying cost in the percentage though but once that's decided then fixed percentage would be fine.
We didn't include buying cost in our case as we felt it complicates things and there'll be no stop into what to add into the list of buying cost.

No it won't. It will only 'end up the same' in 20-30yrs time when the mortgage is paid off. The formula needs to work whenever the property is sold be it tomorrow, 1yrs time or 20yrs time.
Read this thread for an example of someone who has made just that mistake:
https://forums.moneysavingexpert.com/discussion/6047767/buying-out-my-ex-disagreeing-over-declaration-of-trust

cybervic

Tom99 wrote: »

No it won't. It will only 'end up the same' in 20-30yrs time when the mortgage is paid off. The formula needs to work whenever the property is sold be it tomorrow, 1yrs time or 20yrs time.
Read this thread for an example of someone who has made just that mistake:
https://forums.moneysavingexpert.com/discussion/6047767/buying-out-my-ex-disagreeing-over-declaration-of-trust

Finally read that long and complicated thread. Tom you are right there can be a huge difference especially if DoT is not worded properly.

The thread got me to review my DoT again. It basically says each party will take back the deposit plus x% of growth/loss of the property on deposit amount, and then split the rest 50/50.

We didn't use any complicated formulae to calculate total contribution/share up to a date because we felt we were potting together whatever we had and didn't want any worry of who is going to own more in the end as one could overpay the mortgage.

I guess it's up to each couple to decide what's best for their situation then.