Joint Tenants vs Tenants in Common

KaiserKeiser

So here's a scenario...:
My girlfriend and I are buying a new house. We both have children from previous marriages and are bringing unequal money for the deposit. My GF is contributing £100K, I'm contributing £50K. We need to decide on whether we should buy the house as Joint Tenants or Tenants in Common.

We have asked for advice from our conveyancing solicitor, who has suggested that we buy the property as tenants in common, in one of two ways:

1. Given that the difference of contributions is £50k, we suggest the property be held in unequal shares with the first £50k of a sale (following the repayment of any mortgage) being due to GF and then the remaining amount split equally between both parties.

2. Or, following the repayment of any charge, £100k would be payable to GF and £50k to me with the remainder being split equally.

Is there any material difference between these 2 options? The financial outcome would be the same, so we're not sure if one option is technically better than the other.

TIA for any advice you can give.

getmore4less

How are you planning to split any borrowing?
Looks like 50:50
How much are you borrowing?
You could do equitable shares based on cash input and debt servicing.

The get your money back option proposed is the same as the GF lending you £25k interest free.

KaiserKeiser

Thanks!
We're planning to split the borrowing (say £150k) 50/50. Is that normal practice/fair? I'll be contributing more to the household pot every month, however will be more reliant on the pensions she'll get when that time comes, by which time the mortgage will be paid off.

princeofpounds

Putting aside the question of equitable investment vs. equitable split...

You almost certainly should want tenants in common. In a joint tenancy, if you die, she will take over sole ownership of the property. When she then dies, it will be distributed according to her will. She may leave it all to her children alone. Or the cat home. Your children could get nothing.

TIC is necessary to control inheritance issues independently.

But I think the title of your thread is misleading, as what you're actually considering is how to structure your TIC relationship.

AdrianC

1. £50k then 50/50
2. £100k/50k then 50/50

The only practical difference there is what happens if there's £50k-£150k equity in the property on sale.

1 would be far simpler in that situation.
...or...
3. First £150k of equity to be split 2:1, then 50/50

macman

As already pointed out, you need to take into account inheritance issues. If, for example, you were both to die together in an accident, the oldest of you is presumed to have died first. So, with joint tenants, you share would pass on death to your partner if she is younger, and hence exclusively to her heirs. If you are the youngest, then the opposite. However you write your wills would have no effect on this. If this is not what you want, then you need to buy as TIC.

TBagpuss

Another option is to provide for you to retain specific %'s - e.g. if you were buying for £300K, your deed might provide that on sle, you received 16.6% of the sale proceeds and your partner 33%, with any balance being split equally. This means that you each get a return on your original investment, if the value rises, and each share the risk if it falls.

With the option suggested before, if you say your partner gets £50K and then the balance is split, then she gets the £50K regardless of what happens to the house value - which if the value were to fall would mean that she might end up with a bigger proportion of her original investment than you would of yours. 

getmore4less

KaiserKeiser said:

Thanks!
We're planning to split the borrowing (say £150k) 50/50. Is that normal practice/fair? I'll be contributing more to the household pot every month, however will be more reliant on the pensions she'll get when that time comes, by which time the mortgage will be paid off.

In that case the equitable way would be   175:125  == 58.33% 41.66% 
Then if you split it you do the full house value at those % then pay of 1/2 the remaining mortgage each from those shares.

You could make it 50:50 by splitting the mortgage £50k & £100k
or
You could have a side loan of £25k from OH to you that you pay back separately which is the same as what the conveyancer is saying but simpler to implement and for many to understand.
(does require the trust you would cough up the £25k if you split)


You can have joint tenants(which gives survivorship rights) and a deed that splits the proceeds if you split/sell and optionaly create a debt against the survivors estate if you died.

I don't think it is a good idea to mix the ownership with the living it can get very messy with the numbers.

Decide the way you are buying te place and capital costs for maintenance improvements document as that is what determines the split.

Day to day if you are buying more food holidays etc that does not effect the ownership.

Depending on the income imbalance a side loan may be a good way forward and short term 

Depending on the real LTV you could consider borrowing to a break point a bit more to even up the gap. 
eg current numbers are LTV 50% go to 60%(often same rate) and borrow £180k  you can then have £70k £50k each and the side loan is now £10k.