Options for buying into partner's house

shoebox13

My partner owns his own house - I moved in with him and have been paying 'rent' since. (We agreed an amount smaller than I was paying to rent previously, so that if we broke up I wouldn't feel like it had cost me to move in - this felt like the best compromise).

Nearly three years on, we're engaged and would both like to feel more jointly committed to the house - whilst also protecting the fact that he has put far, far more into it than I can afford to!

These figures aren't accurate but give a vague idea:

Partner's initial deposit plus mortgage payments so far: £250k
Mortgage outstanding: £600k
House value today: £900k
My savings: £50k

We could probably contribute 50/50 to the mortgage and bills from here on in - I earn a lot less so would have much less left over each month, but that's obviously fine. However it would mean, in all likelihood, that he would spend much more than me on things like house refurbishments. I guess at that stage we're starting to get into how couples deal with the fact that one earns more than the other, and therefore pays more for joint stuff.

We've both been burned in the past by breakups, and so whilst we're very committed, hope to be together always, have children, etc etc, we also want to be sensible. I want all the hard work and financial commitment he put in before he met me to be protected, but also want to have the opportunity to own property. If I were single, now is about the time I'd be able to look at buying a flat of my own - but it would be worth a lot less than this house!

Thoughts?

foxy-stoat

If you are added onto the mortgage and Title Deed as Tenants in Common with unequal shares and get a Deed of Trust drawn up to state either a percentage split or what the split is in 2019 money - obviously the end result in say 10 years would be different depending if you want to protect £50,000 or a percentage of the overall property if you go separate ways, but I would put a something in there that if you had children under 18 years old at the split then it should be closer to 50/50. You both will also be able to leave your share do different people if you wish, does he have children from past relationship?

shoebox13

Thanks so much for the reply.

So am I right in thinking that tenants in common (as opposed to joint tenants), allows us to own different proportions of the house?

So I guess one way of doing that would be for him to own 5 x more than me (given that, if I put the £50k in at this stage, he's put in 5 x more than me in deposit/mortgage payments so far). Though I don't really know what the implications then are for the mortgage - presumably we are both equally liable for that? Or can you be unequal partners on a mortgage too?

I think the bit that then throws me is what happens if we split after, as you say, 10 years of owning it jointly. There'd still be nearly 20 years of mortgage left. At that stage do you value the house to work out how much equity is in it, and then we're entitled to our relevant proportions of that equity?

(Nope, neither of us have children from previous relationships).

Thanks, again!

[Deleted User]

shoebox13 wrote: »

Thanks so much for the reply.

So am I right in thinking that tenants in common (as opposed to joint tenants), allows us to own different proportions of the house?

So I guess one way of doing that would be for him to own 5 x more than me (given that, if I put the £50k in at this stage, he's put in 5 x more than me in deposit/mortgage payments so far). Though I don't really know what the implications then are for the mortgage - presumably we are both equally liable for that? Or can you be unequal partners on a mortgage too?

I think the bit that then throws me is what happens if we split after, as you say, 10 years of owning it jointly. There'd still be nearly 20 years of mortgage left. At that stage do you value the house to work out how much equity is in it, and then we're entitled to our relevant proportions of that equity?

(Nope, neither of us have children from previous relationships).

Thanks, again!

If you are going to split the ownership 83.33%/16.67% then that's the ratio you should also make the mortgage payments. If you are going to split the mortgage payments 50/50 then it wouldn't be fair to have the ownership as 83.33/16.67 tenants in common.

There are lots of threads on the forum detailing the various ways the splits could be done.

https://forums.moneysavingexpert.com/discussion/6062070/unequal-deposits-buying-a-house

https://forums.moneysavingexpert.com/discussion/6053185/uneven-deposit-and-equal-mortgage-repayments

Although eventually once you are married and have been for a good long while this could all become moot.

shoebox13

Thank you so much - I started thinking about this almost as soon as I had pressed send on the previous post!

Absolutely re the long-term implications of marriage, children etc. We've talked about this a lot and are, of course, hopeful that the whole thing becomes moot anyway! It seems to a psychological thing for us both as much as anything - a desire to be 'officially' tied together on the same commitments.

princeofpounds

Yes tenants in common with unequal shares is probably the best approach here. It's probably wise to develop an agreement as to what will happen if you split before marriage - presumably he would get first refusal to buy out your share again; would you have the right to demand he does so, or to market the property? Your lawyers can help with that.


Once you're married*, the house becomes a marital asset, so whilst you will still have a minority direct share, your indirect rights over the property will increase to include things like an initial presumption of a 50/50 split of assets in any divorce settlement. Having children will also make it more likely that a court would prevent a sale until they have reached majority.


But one important thing; you are thinking about the maths in the wrong way. The sum total of his mortgage payments to date is not an important number. Most of that would have been interest, which is just him renting the money off the bank for past use of it. It is not value which he has contributed to the house (except the smaller part of principal repayment). Unless you actually meant principal payments and were just using loose language...


The relevant numbers are the amount of equity he currently has (house value minus the mortgage principal outstanding) and the amount of equity you will be contributing, assuming that you then follow the same ratio in your ongoing mortgage payments (which is probably the easiest).


*It's a slightly different situation if you split up after a short marriage (in the legal sense ~2yrs but situation is taken into account).

shoebox13

Thanks so much, this is really helpful. I was absolutely thinking of the maths in the wrong way!

That all makes sense, and would presumably ensure that the uplift in value he's seen on the house since he bought it (based on sales prices in our street, at least) is protected for him too.

getmore4less

Mortgage payments/rent upto now is irrelevant at absolute values but you could adjust for your contribution upto now as 3 years is a decent amount of time.

Given the difference in income I would probably go for an equitable share.

split everything in a way to keep your disposal realistic.

At £900k with £600k mortgage and your £50k cash


If you took on 30% that could be £250k of the mortgage and OH gets your £50k cash.

But then you have no cash to fund your 30% of the improment cost if you plan any.
You could keep your cash and do £300k of the mortgage but you identify that would stress your cashflow.

Maybe 20% £180k of the mortgage keeping the cash could work.

The problem with made up numbers and only some make getting the balance right difficult.

foxy-stoat

shoebox13 wrote: »

Thanks so much, this is really helpful. I was absolutely thinking of the maths in the wrong way!

That all makes sense, and would presumably ensure that the uplift in value he's seen on the house since he bought it (based on sales prices in our street, at least) is protected for him too.

I wouldnt over think it to be honest, if you split within a few years then you are just protecting your £50K and his equity as of today. If you split after a decade of being married then it would be different. Are you going to work out the saving on interest by paying £50,000 into the mortgage and maybe putting it into a lower LTV % bracket and factor that in as well?

shoebox13

Oh I'm definitely very often guilty of overthinking!