Declaration of trust - sales fees?

getmore4less

badger09 said:

To be honest, I would KISS (Keep It Simple Stupid - just a phrase, not you!)

As you've agreed a split of the main costs, simply apply the same split elsewhere. There's enough to sort out, without getting bogged down with minor amendments. If/when your financial, or legal status changes, have a rethink then. Good luck.

Agree,
It is so close to 1/2  2/3, only needs a few £K differences in the deposits to make everything done that way.
i

leypt1

getmore4less said:

to explain and show why......

The house price is 385000 and the mortgage is 85% of this.
Shares are as follows:
Partner 1 is paying 43k of the initial deposit (or 11% of the purchase price) and 65% of the mortgage from that point.
partner 2 is paying 14.8k (3.84% of sale price) of the initial deposit and 35% of the mortgage. 
mortgage £327.2  split £212.68 £114.52
1, £43 + £212.68  = £255.68  = 66.41%
2, £14.8 + £114.52 = £129.32 = 33.59%
fairly close  to your 66/33

Overpayments, structural changes etc etc will all be paid for in a split of 65/35.
overpayments should be at the mortgage split not the ownership split.
costs should be at ownership split.

after selling the flat and paying off the mortgage and sale costs, we split the equity 66%/33%
this is a problem because on day one ignoring the costs if you do this you end up with(using 66.5/33.5)

1 : £38.437k
2 : £19.363k
Which is not what you put in.

To have the deposit and mortgage split the same %  so everything else is also done at the same % and the pay off mortgage first works you need to adjust it slightly.

For 65:35   if we use the £43k  the other deposit needs to be closer to £23k
The current  deposit ratio is closer to 74:26 so you could go with that for the mortgage as well.

given this is also very close to 1/3  2/3
P1 could gift/lend  P2 £4.5k to  make the deposit a 1:2 ratio and then split the mortgage 1:2 ratio  

all nicely balanced. own the place 1/3 2/3 and pay the mortgage 1/3  2/3


 

Hi,
Thanks very much for this - it was VERY confusing but we've realised that we'd overlooked a crucial point, which is that the 66.4/33.7 split only applies if the mortgage is paid off in full! At any other point we'd be looking at a split somewhere between the deposit split and mortgage split, depending on how much had been paid off by that point.

We've discussed it and for various reasons we've decided to stay with different shares for the mortgage and deposit, but paying ourselves before the mortgage, i.e. the DOT would now read:

"Sale proceeds less sale costs to be shared in full 66.3/33.7. Then each partner to contribute towards the remaining mortgage payment in shares of 65%/35%"

We've run 3 scenarios (mortgage paid in full, selling the property on day 1, selling it somewhere in between) and this seems to check out in the sense that on day 1 we'd each just get our deposits back and in year 25 we'd get the full equity split 66.3/33.7.

Tragically we're bad enough at maths that my original question still stands - does the "sale proceeds less sale costs" reflect that we'd pay sale costs in the ownership shares?

leypt1

steampowered said:

Personally, I would split the equity as follows:
- Equity equivalent to the first 14.84% of the property gets split according to your deposit.
- Any remaining equity gets split 65/35. 

If you prefer to keep it simple by agreeing a 65/35 split, then I think all sale costs as well as things like ground rent / service charge  should be split in the same proportion.

Thanks, this is actually what we had decided (the 66.4/33.6 was the result of doing this calculation on the assumption that the mortgage had been paid off in full).

Getmore4less pointed out that this working at any point *before* the 25 year term is up hinges on whether we pay off the mortgage before or after splitting the equity.

getmore4less

Sales cost come off first that is the ownership %. 

I would still consider the 1/3 2/3 for everything it's so close.

rik111

Love these people planning for their split before they have even moved in together, that’s real commitment for you.....

leypt1

rik111 said:

Love these people planning for their split before they have even moved in together, that’s real commitment for you.....

I can't really imagine why anybody would not prepare for the possibility, risking a break-up becoming immeasurably worse than it needs to be *shrug*

getmore4less

By discussing the finances you go into the relationship understanding each person's position on how it might work. 

Too many people going in blind and come unstuck when it turns out they were not on the same page.

Some splits are not a breakdown of the relationship you need to do the same financials in case one of you dies so it is clear what will be part of your estate and what should happen to that. 


The easy bit is the numbers, much harder to go through the can't pay won't pay, sale buyout triggers, kids, death etc. 

Overlooking the death scenario can cause issues for the survivor and the administration of the deceased estate. 

saajan_12

TBH Getmore4less's suggestion of the side gift/loan so that everything can be at 2:1 ratio sounds the simplest. If you don't want to do that, then you need to think of the mortgage as two separate loans (though note if one of you doesn't pay, the other would be covering to the mortgage company and you'd have to sort out paying eachother back between you). 

Person A: 43k deposit + 212.7k mortgage (65%) = 66.4% of purchase price. 
Person B: 14.8k deposit + 114.5k mortgage (35%) = 33.6% of purchase price. 
All mortgage related payments (including arrangement fees, overpayments, paying off balance at the end etc should be done in the 65/35 split. 
All other capital expenses (including solicitors, property improvements, extensions, ground rent etc should be done in the 66.4/33.6 ownership split.