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fleur8

Thanks guys 

like post number 4 - no reason 

AskAsk

seems reasonable to me.

[Deleted User]

fleur8 said:

I’m hoping that someone can look over my sums and agree/disagree that it makes sense? I’ve read through lots of threads and most have been helpful but many have threads with conflicting information within them. My solicitor has asked for the percentages on a tenants in common form and when I asked for help, he again asked for the percentages so I get the picture. 

I’ll call my partner Jim. 

Property price £600,000
15 % deposit £90,000

Jim’s deposit (?equity) = £60,000 
My deposit/?equity = £30,000

Mortgage amount is £510,000
Split 50/50 = £255,000

Jim’s share will be £60,000 + £255,000 = £315,000 (315/600 = 52.5%)
My share will be £30,000 + £255,000 = £285,000 (285/600 = 47.5%)

Is this correct assuming that we will split the mortgage 50/50?

Once the mortgage has been repaid it makes sense but it doesn't make sense from day 1.

OP's previous thread about becoming equal TIC over time. 

https://forums.moneysavingexpert.com/discussion/6212309/how-to-make-tenants-in-common-equal-over-time

getmore4less

That's fine as long as you calculate the selling shares before taking off the mortgage then you pay outstanding mortgage from your shares. 

Might be easier to do the side loan of £15k to balance it to 50:50.

AdrianC

The correct percentage is whatever you agree between you.
You are a pair of mature, reasonable adults engaging on a very major financial obligation, after all, so asking strangers to adjudicate on a question of 2.5% of a purchase of nearly two-thirds of a million pounds may seem a little... petty and indecisive.

saajan_12

fleur8 said:

I’m hoping that someone can look over my sums and agree/disagree that it makes sense? I’ve read through lots of threads and most have been helpful but many have threads with conflicting information within them. My solicitor has asked for the percentages on a tenants in common form and when I asked for help, he again asked for the percentages so I get the picture. 

I’ll call my partner Jim. 

Property price £600,000
15 % deposit £90,000

Jim’s deposit (?equity) = £60,000 
My deposit/?equity = £30,000

Mortgage amount is £510,000
Split 50/50 = £255,000

Jim’s share will be £60,000 + £255,000 = £315,000 (315/600 = 52.5%)
My share will be £30,000 + £255,000 = £285,000 (285/600 = 47.5%)

Is this correct assuming that we will split the mortgage 50/50?

Yes, that would be fair shares of the PROPERTY VALUE. That's not the same as your shares of the equity or mortgage. 
Until the mortgage is paid off, you still 52.5% / 47.5% shares of the property value, but you each 50% of the mortgage balance from your respective shares

Some examples to illustrate: 
- If you sell and part ways tomorrow, then Jim gets 52.5% of value = 315k, less 50% of mortgage = 255k, so net 60k. You get 47.5% of value = 285k, less 50% of mortgage = 255k, so net 30k

- If you sell in a few years, when 110k is paid off the mortgage and the property value has doubled £1,200k, then
Jim = (52.5% x 1,200k) - 50% x 400k = 630k - 200k = 430k
You = (47.5% x 1,200k) - 50% x 400k = 570k - 200k = 370k. 
You both have benefited from the appreciation on the mortgage repayments, but Jim had a slightly bigger appreciation as he invested more. 

- If the market tanks in a year, when 10k is paid off the mortgage and the property value has dropped to £500k, then
Jim = (52.5% x 500k) - 50% x 500k = 262.5k - 250k = 12.5k
You = (47.5% x 500k) - 50% x 500k = 237.5k - 250k = -12.5k. 
On paper, that's how you calculate the shares first. In practice, the mortgage company will want all their £500k immediately, even from Jim's share, and you would need to pay Jim back the 12.5k separately. Note this final scenario is the downside of this method, fairly unlikely given you have a healthy deposit and I assume you don't expect to sell in the near future. Longer term, you'd have paid more off the mortgage so this close to negative equity scenario doensn't arise as much. 

getmore4less

fleur8 said:

getmore4less said:

That's fine as long as you calculate the selling shares before taking off the mortgage then you pay outstanding mortgage from your shares. 

Might be easier to do the side loan of £15k to balance it to 50:50.

Sorry I’m not sure what you mean by selling shares? I’m not sure I can commit to the £15k loan right now as I owe my parents £25k of the deposit but I agree it would
Be ideal. 

its a % of the property value before the mortgage is taken off which you would owe 50:50

if you take the mortgage off first then split you get the wrong answer for what you each get.

getmore4less

fleur8 said:

getmore4less said:

That's fine as long as you calculate the selling shares before taking off the mortgage then you pay outstanding mortgage from your shares. 

Might be easier to do the side loan of £15k to balance it to 50:50.

Sorry I’m not sure what you mean by selling shares? I’m not sure I can commit to the £15k loan right now as I owe my parents £25k of the deposit but I agree it would
Be ideal. 

Does the lender know this is a loan?

getmore4less

fleur8 said:

getmore4less said:

That's fine as long as you calculate the selling shares before taking off the mortgage then you pay outstanding mortgage from your shares. 

Might be easier to do the side loan of £15k to balance it to 50:50.

Sorry I’m not sure what you mean by selling shares? I’m not sure I can commit to the £15k loan right now as I owe my parents £25k of the deposit but I agree it would
Be ideal. 

(I split this into three answers)

it could be interest free and on payment terms where you csn pay it back later.
What about taking on £15k more of the mortgage that would balance to 50:50 then you pay the £15k off over the term of the mortgage or if sold you still owe a bit more

oniongirl

Have you considered a deed of trust?

I paid the deposit on our first house with my then boyfriend (he's now husband, so we got rid of it).

The DoT said that, if we sold, first we'd pay the mortgage off, then I'd get my deposit back, then we'd split any profits equally.

If the house decreased in value to less than the outstanding mortgage (negative equity) we'd  be liable to pay the remainder of the mortgage equally.

You could do similar. First pay the mortgage off, then pay yourselves the exact deposits you put in, then split any profits equally.

Lenders get a bit iffy about the wording though. They want to make it super clear that they get first dibs 😂

getmore4less

oniongirl said:

Have you considered a deed of trust?

I paid the deposit on our first house with my then boyfriend (he's now husband, so we got rid of it).

The DoT said that, if we sold, first we'd pay the mortgage off, then I'd get my deposit back, then we'd split any profits equally.

If the house decreased in value to less than the outstanding mortgage (negative equity) we'd  be liable to pay the remainder of the mortgage equally.

You could do similar. First pay the mortgage off, then pay yourselves the exact deposits you put in, then split any profits equally.

Lenders get a bit iffy about the wording though. They want to make it super clear that they get first dibs 😂

that is financially the same as a side loan of 1/2 the deposit interest free.

lenders don't need to worry their Mortgage on the property(the security charge ) trumps any DOT.