Unequal deposits and unequal mortgage payments

Rowantree123

My partner and I are looking to buy a house together with unequal deposits and unequal mortgage payments. This is because I have £100k deposit and he has £30k deposit, however he earns £60k and I earn £30k. The house is £500k, so our mortgage will be £370k. I will make mortgage payments on £150k of this (£250k, which is half the cost of the house, minus £100k, equals £150k, and for my partner, £250k minus £30k equals £220k). This is roughly a 40/60 split of the mortgage repayments. Therefore, over time, my partner's investment will increase at a quicker rate than mine (although my initial deposit is a lot higher). I would be really interested to hear suggestions on how we might protect our investments. We intend to split all fees (stamp duty, legal, etc) and household bills 50/50. Thank you!

AdrianC

You're both grown adults, so you're perfectly capable of coming to an agreement between yourselves as to what seems fair to you. If not, then this relationship is doomed.

But how about something along the lines of the first £70k or 14% of any equity is yours, then the rest is split 60/40?

Doozergirl

A deed of trust in which:

You acknowledge the deposit of £130k. You agree that 77% is yours and 23% is his.

You acknowledge that the mortgage payments are made 60/40 in his favour.

So if the house is sold before the end of the mortgage term, you get your full deposit back plus 40% of any equity built up.

He gets his £30k back plus 60% of any equity.

What you do with profit or loss on the £500k value is a different question. I think I would work on the deposit % and mortgage balance % at the time, which means that his overall % would increase over time even if the house lost money.

So if it goes up/down by 10% you would split it the same way as if it were £500k.

I have to go out or I'd give some examples of selling prices.

This goes out of the window if you get married.

getmore4less

Simple, don't over complicate.

You own 50:50 £250k each.

You £100k + £150k debt
him £30k + £220 debt.

when(sorry if) you split, you get 50% each after costs but before paying off the debts

Then pay off whatever is left of your share of the debt.

You can treat the debts as two virtual debts even though they are borrowed from the same place and each on your own repayment plans.(very simple to set up and track)


For all other house costs like maintenance and improvements you should pay for those 50:50.
(think about that with you on the lower income?)

People seem to understand this if you borrowed from two places like off your own parents.
Then loose the plot when it comes from a single source.

This equitable algorithm works fairly for
All values of deposit
All mortgage shares
Differential overpayments on the debt
House value going up/down.

pinkshoes

Why not just go 50/50 then he repays you for his lack of deposit?

E.g. £130k deposit, so £65k each. He only has £30k, so owes you £35k.

Get an agreement of how he will repay the £35k to you. If the house is sold, then any of the remaining £35k debt can be deducted from his equity share.

getmore4less

picking up on this point I made about unequal income and cash flows

(think about that with you on the lower income?)


If there is a requirement to inject more money into the property(maintain/improve), but you cant save up fast enough, the OH can.

Then because there are these virtual debts you can adjust those if the OH has the cash to pay the bills and you don't

Say there is £4k bill left for something after you paid the equal bits, that would be £2k each(as you own 50:50).

If you don't have £2k you could borrow the £2k off the OH to pay your share by transferring £2k of the debt from his side to yours.

getmore4less

pinkshoes wrote: »

Why not just go 50/50 then he repays you for his lack of deposit?

E.g. £130k deposit, so £65k each. He only has £30k, so owes you £35k.

Get an agreement of how he will repay the £35k to you. If the house is sold, then any of the remaining £35k debt can be deducted from his equity share.

That is in effect what the differing mortgage share does just describing it differently.
Also using the mortgage allows for interest on the difference at the mortgage rate, if you do that with a loan it becomes taxable.

Tom99

Your DOT trust needs a 3 part formula. Assuming £500k is the all up cost incl stamp duty and fees:

[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 – 20% of the gross sale price less costs of sale. [/FONT]
[FONT=Verdana, sans-serif]Party B – 6% of the gross sale price less costs of sale[/FONT]
[FONT=Verdana, sans-serif]The remainder – Split 40.5% to Party A and 59.5% to Party B’[/FONT]
[FONT=Verdana, sans-serif][/FONT]
[FONT=Verdana, sans-serif]You will eventually own the property 50/50 but only when the mortgage is paid off and providing you stick to your proposed split of mortgage payment including any overpayment.
[/FONT]