Unequal deposits - calculating % ownership. Advice please!

fthousebuyer85

In the process of buying a house with my partner (not married), and we will have a tennancy in common agreement drawn up due to unequal deposits. Can anyone help clarify if what we are proposing is fair?

Total cost of house: £740k (£710k purchase price + £30k in renovations)
Mortgage £520k
Person one cash investment one: £180k
Person two cash investment: £40k

Mortgage payments will be made 50/50.  From what I have read, one way to calculate a split in ownership would be to work out each individuals share as:
(50% of the mortgage+deposit)/total investment. In which case, person one would have 59.45% (440/740), and person two 40.54% (300/740)

Is this the correct way to calculate ownership split?

In the event that the house was sold tomorrow for £740k and we recouped the original £220k cash investment, person one would only be entitled to 59.45% of that (£130k on an original £180k investment), which seems to disproportionately favour person two. Can anyone help with advice?

cooltt

fthousebuyer85 said:

Is this the correct way to calculate ownership split?

In the event that the house was sold tomorrow for £740k and we recouped the original £220k cash investment, person one would only be entitled to 59.45% of that (£130k on an original £180k investment), which seems to disproportionately favour person two. Can anyone help with advice?

This question is asked again and agian on this forum.

Yes you can calculate as you have done.

HOWEVER what both parties often fail to fully appreciate is, it is actually irrelevant to a degree who puts in what as a deposit. If neither party can afford the house by themselves then that is a huge factor in deciding a percentage of ownership.

A much fairer way forward due to you having to pool resources is a 50/50 split mortgage AND 50/50 ownership. When the house is sold the partner who put in 180k simply gets that back over and above the equity share.

You can argue about deposit amounts until the cows come home but (as i said) if this property could not be bought any other way a 50/50 split is the right, fair and logical, way forward.

getmore4less

You get the share then pay off the  50% of the mortgage from that share. 

The get your deposit back is just an interest free loan of 1/2 the difference between deposits. 

Loads of threads read a few.

fthousebuyer85

getmore4less said:

You get the share then pay off the  50% of the mortgage from that share. 

The get your deposit back is just an interest free loan of 1/2 the difference between deposits. 

Loads of threads read a few.

Appreciate the response, and I have read several of the threads. Not sure I follow your comment though if you are able to clarify.

getmore4less

You get the % ownership back first then pay the 50% of the debt(mortgage). 

You reverse the process you got to the % ownership. 

CharlieT130

My partner and I are in the same position. Our declaration of trust states that we each get back the deposit we put in and any remaining equity is split as 60:40, which is our agreed split of mortgage payments.

I'm sure somebody could argue it a different way, but the most important thing is that we are both happy with our agreement.