How do I work out living costs with partner?

Grumpy_chap

Lover_of_Lycra said:

Falafels said:

I'm not understanding how the OP can, in all seriousness, wonder if they own 100% of the property because of putting down the entire deposit, whilst having a signed agreement that they actually own 60%. Perhaps a prerequisite to having a fair agreement would be a bit of joined-up thinking???

Me neither. There’s some interesting mathematics going on. 

Indeed, the 60 / 40 split is particularly odd given that the OP's £55k deposit is 15% of the purchase price and then they have each agreed to pay 50% of the mortgage going forwards.  If owners ship is to be unequal percentages, a more logical approach would have been:
OP = First 15%
Remaining 85% split 50 / 50, so:
OP = 57.5%
OP's Partner = 42.5%
The 60 / 40 is slightly overly generous in the OP's favour.  Especially as to receive the mortgage the OP's partner has the tax bill for the fraudulent sole trader profits (£4k or £8k).  I wonder how the costs of purchase were funded?

It really does seem to be this:

SDLT_Geek said:

OP might be considering a swift sale of the property.  Assume for now it is sold for the same as the price it was bought for.  After expenses of purchase and sale and repayment of the joint mortgage, the amount left will be less than OP’s contribution.

So OP would want 100% of that remaining equity, not 60%.

Maybe this is a thread for the relationships board and not house buying...

MFWannabe

finchy_2020 said:

Me and my partner have purchased a house. I was the only one lucky enough to have the deposit to secure the house but being self employed my partner also declared a lot of profit and is paying a huge tax bill so we got a higher value and the house we want.

we are splitting the mortgage and living costs 50/50 and any work that needs doing to the house which can be done by my partner (painting, sanding the floorboards, putting up shelves mirrors etc...) he is happy to do but any major work I’ll be paying for (I have about £25k to spend on the house for when we get a new kitchen, bathroom etc...) my partner won’t be able to contribute much because of his job and Covid he’s not making as much but can afford to pay the mortgage! 

how do we find a common ground to split the house so it’s fair on both parties? If I’ve put down all of the deposit do I own 100% of the house? 

This was written down as a 60/40 split when you purchased, so you decided this at the time 
Maybe you’re now regretting it as your partner can’t pay as much? 

You’re now worried about the deposit you put down? And extra monies you’ll be putting into the property (more than partner) 
All this should have been dealt with at time of of purchase and I don’t know if it can be changed now? 

Very worrying is the state of your relationship that you’re worrying about this as most solid relationships have ups and downs around money and what each can contribute at different times 

SDLT_Geek

Grumpy_chap said:

 If owners ship is to be unequal percentages, a more logical approach would have been:
OP = First 15%
Remaining 85% split 50 / 50, so:
OP = 57.5%
OP's Partner = 42.5%
The 60 / 40 is slightly overly generous in the OP's favour.  

I have looked back at the way @Tom99 used to explain it.  In this case he might have suggested a "dynamic" formula where the shares change over time as the amount of mortgage outstanding changes.  Let us start with some figures.

Let us call the total costs of purchase £345K and OP's cash payment £55K.  OP and the partner "put in" the other £290K of borrowed money equally, so that is £145K each to give contributions (including borrowed money) of £200K and £145K.  

Let us adopt the @Grumpy_chap percentages of:
OP 57.5%
OP's Partner 42.5%

The formula @Tom99 might have used would be:

"On a sale, the net sale proceeds after deduction of sale costs and mortgage debt will be split:
OP - (57.5% of Gross sale proceeds less costs of sale) but then less 50% of mortgage outstanding
OP's partner - (42.5% of Gross sale proceeds less costs of sale) but then less 50% of mortgage outstanding".

This formula gives different results at different times depending on things like the sale proceeds and debt.  For example:
(a)  If the property is sold soon after, without making a profit  or loss and without the mortgage having been reduced, OP will get all of the net equity.
(b)  If the property is sold many years later when the mortgage has been paid off, then OP would get 57.5% and the partner 42.5%.

Come back @Tom99!

SDLT_Geek

On a roll now:

OP mentioned the possibility of putting another £25K into the property.  Using the figures and analysis above, that would suggest OP will have put in a total of £225K and the partner still £145K (total £370K).  That gives headline percentages of say 61% and 39%.

The dynamic formula @Tom99 might have used, to take effect once the £25K of work is done, would be:

"On a sale, the net sale proceeds after deduction of sale costs and mortgage debt will be split:
OP - (61% of Gross sale proceeds less costs of sale) but then less 50% of mortgage outstanding
OP's partner - (39% of Gross sale proceeds less costs of sale) but then less 50% of mortgage outstanding".

Grumpy_chap

Another way that can be used is the original deposit £55k is set as a fixed sum (so no associated appreciation / depreciation with property price movements) and then the balance of equity over that split 50/50.  I assume the OP did not want that "fixed sum" approach because the OP did not want to miss out on future house price inflation associated with the £55k - the catch of that long term greed is that the percentage only approach leaves the £55k at risk in the short term.

However, any talk of alternative calculation methods is entirely academic as it has been set at the time of purchase, all done through the Conveyancing Solicitor which the OP & OP's partner agreed to:

finchy_2020 said:

We have a tenants in common document which shows that I own 60% and my partner owns 40% but he’s not put any physical money into the house... I have?

Whether at the time of sale, 100% of payments came from one partner or the other, it is irrelevant.  The ownership split is pre-determined.  Given this relationship looks like an early termination is happening, the best the OP can hope for is that the partner agrees to not take any equity from the sale of the house and return the OP the full £55k deposit.  That is entirely down to the OP's partner showing some goodwill as the legal position seems clear.

Quite likely the OP's partner is not actually in a position to maintain the payment needed for the monthly mortgage so the whole sum is falling to the OP to cover which is becoming a struggle:

finchy_2020 said:

my partner won’t be able to contribute much because of his job and Covid he’s not making as much but can afford to pay the mortgage! 

I understand the partner is a builder, so why there is no work because of COVID I am not sure - all the trades around where I am are stupidly busy at the moment.

Behind all this is the pending fraud case if the OP / OP's partner fall behind on the mortgage repayments between them.  There have been other threads where people say they could not get a mortgage if they accepted SEISS / BBLS / put on furlough.  In this case, not only has that been concealed, but the OP / OP's partner has fundamentally declared a false income for past years to satisfy the mortgage earnings multiples.  Unless the OP's partner has a habit of under declaration to HMRC to avoid tax liabilities. 

I know others have said that mentioning the fraud situation is not helpful - I agree to a certain extent as it would be far more preferable not to be in this mess to start with.  However, the OP & OP's partner are in this mess.  It was their decision to get into this mess.  The sooner the OP realises and understands the full seriousness of what the situation is, the sooner the OP & partner can take ownership of the situation.  In the long term, losing 40% of that £55k now might not be nearly half as bad as a fraud case and the associated long term impacts of the same.

getmore4less

The get you money back is just the same as an interest free loan of 1/2 the money to the other person. 

CSL0183

Hmm, I think the equity share has been worked out a little odd. 

Purchase price of £345k
Deposit of £55k 
Cash injection for improvements of £25k
Total = £80k or 23% of the purchase price. 

If the renovations were done and the couple were to split the next day then how could it be fair that the house is sold and the profits be split 60/40? 

Owner 1 - has put £80k into the house but owner 2 would get 40% of that and then 40% of any further equity. 

Surely the £80k invested by owner 1 should be protected in its entirety and then the remaining profit over that split 50/50? Why would owner 2 get 40% of the £80k owner 1 has put in? 

Or have I misunderstood? 

Angela_D_3

CSL0183 said:

Hmm, I think the equity share has been worked out a little odd. 

Purchase price of £345k
Deposit of £55k 
Cash injection for improvements of £25k
Total = £80k or 23% of the purchase price. 

If the renovations were done and the couple were to split the next day then how could it be fair that the house is sold and the profits be split 60/40? 

Owner 1 - has put £80k into the house but owner 2 would get 40% of that and then 40% of any further equity. 

Surely the £80k invested by owner 1 should be protected in its entirety and then the remaining profit over that split 50/50? Why would owner 2 get 40% of the £80k owner 1 has put in? 

Or have I misunderstood? 

Well its a bit late for that 

Grumpy_chap

CSL0183 said:

Cash injection for improvements of £25k
If the renovations were done and the couple were to split the next day

You are not giving any consideration or value to the time and skills of the OP's partner:

finchy_2020 said:

any work that needs doing to the house which can be done by my partner (painting, sanding the floorboards, putting up shelves mirrors etc...) he is happy to do

Whether the split is fair or not, it is too late to decide as the two of them have already determined 60 / 40 prior to purchase.  Change of mind straight after purchase and one half of the couple wanting 100% of the equity is irrelevant, unless the other shows generosity.

I would also suggest, given the way this thread has developed, it is likely hypothetical to talk about the value (either the OP's £25k or the OP's partner's skill and time) of the renovations as it seems highly unlikely that the arrangement will remain in place for long enough that this work is ever done by this couple.

The valuation of any split should really also take into account the tax bill associated with the OP's partner falsely declaring income to secure a bigger mortgage.  The best the OP and the OP's partner can really hope is to get out of this is without the fraud being uncovered and the long-term damage that will inflict on both their financial futures - likely greater than the way the £55k deposit is split.  It is a moot point as to whether they should get away with fraud, but that is the best possible outcome for the two of them.

WiseOwl00

If the tenants in common document states 60/40, then you own 60% of the house. That decision was made when you both signed the tenants in common document from your solicitors. If you were to sell the house at the moment, assuming you sell for exactly what you paid, then you'd get 33k and he'd get 22k (making up the 55k deposit you put in). That's legally binding and there'd be no disputing it unless you protected your deposit with a deed of trust, or if he was willing to gift you the money back. It doesn't matter that he hasn't yet contributed a penny, you signed that legal document. 

How you wish to divide the mortgage payments now is up to you. You could try split it in such a way that he's paying more each month, so that gradually he ends up matching the amount of deposit that you originally put in. This gets complicated when you consider that house values will change, he will only ever own 40% of the property, and that he will be putting in labour for the renovations. Additionally, there is no legal obligation for him to pay more than you.  To be honest, it sounds a bit messy. 

I don't mean to be rude, but I'm just amazed you both got through the conveyancing process. I'm buying with my partner and we're both contributing 50/50 for everything (deposit, mortgage, bills, etc.) and went for joint tenants. We plan on staying together for the rest of our lives, but I still read that document really carefully.