Tenant in common unequal shares - how to become equal shares?

whosthatgirl1989

My partner and I bought a house and had a declaration of trust drawn up as he had a higher deposit than I did. Our split is 53% his, 47% mine. If I were to use my savings to buy the 3% from him by overpaying with a lump sum on the mortgage, making us 50/50 equal shares, how would I work out what amount I'd need to overpay? And then presumably we'd then need to go to a solicitor to change the declaration of trust from unequal to equal shares? 

Would me overpaying the difference between our original deposits do it? Or is that not fair on my partner as the house has increased in value since we bought it?

If anyone else has done this, it'd be great to know how you worked it out. Thanks

getmore4less

how did you get to  53:47   did you include the servicing of mortgage debt.

how to even up will depend on the wording of the trust on what you would each get on a split now

Many get that initial sharing wrong you may agree to fix that if yours is wrong.
Some if it has not been that long may take the simple approach and just pretend you are at the start and make up the difference.

Once you work out the cash value of the difference off each share you pay 1/2 of that to the OH even up.
you can then decide if you want it to come of the mortgage and each pay the same(if you are currently paying it 50:50)

kimwp

I think you would relate it to the mortgage, not the value of the house as effectively you are buying (off him) a bit of the contract that allows you to own the house (ie the mortgage). The value of cash decreases with time due to inflation, so you could perhaps work out what the equivalent value today of (half) the cash difference when you took out the mortagage and give him that? (Let me know if this needs a better explanation)

@getmore4less makes a good point - consider how the monthly payments have been made if you want to split the house ownership.

getmore4less

The value of what the cash or mortgage bought goes up/down that is what you are buying.

The chosen calculation has to work for all combinations of deposits and mortgage.

If the place had been bought 100:0 then the buyout would be based on value to get to 50:50.

If the mortgage had been paid off it would be 3% of value(if the original 53:47 had been done right)

whosthatgirl1989

We worked out the split by dividing the mortgage amount by 2 (because we are paying the mortgage and anything to do with the mortgage 50/50) and then adding our deposit to that amount then dividing that by the property price.

We have lived here nearly 4 years. Remortgaged after 2 and will be remortgaging again soon.

I'd not realised halving the difference between the two deposits would be the 3%, thanks kimwp. I was thinking it was the full difference but that would take me to 53%, dur! 

Is that what would be fair then for me to lump sum overpay the half the difference between our deposits based on how we worked out the split?

getmore4less

OK  1/2 mortgage + deposit  to buy the share  where you split the value and then pay off your share of the mortgage from that share  is good.

Makes it easy to do

you work out the the current value  and give your OH 3% of that and you are then 50:50.

if you want to do it as a mortgage payment it would be 6% from you (actually 3% each but you just gave the OH their 3%) you in effect pay off 3% each as well as balance the ownership.

You could agree anything you want but that would be the equitable way using current value.
OH may be happy with the 3% at purchase price or something in between.

At purchase price would have been the same as you owning 50:50 at the start with the OH lending you 1/2 their larger deposit portion.

whosthatgirl1989

Our last valuation when we remortgaged was £245k. Purchase price was £225k.

So I can buy the 3% off my partner by giving him 3% of our last valuation? £7,350.

If we want to do it as a lump sum overpayment it would be £7,350 from "him" and the same from me £7,350? So I'd be putting in £14,700 for us to be 50/50 paying it off the mortgage or £7,350 paying it to my partner? Is that right? I'm a bit confused to be honest   

Thanks for your help getmore4less.

kimwp

whosthatgirl1989 said:

We worked out the split by dividing the mortgage amount by 2 (because we are paying the mortgage and anything to do with the mortgage 50/50) and then adding our deposit to that amount then dividing that by the property price.

We have lived here nearly 4 years. Remortgaged after 2 and will be remortgaging again soon.

I'd not realised halving the difference between the two deposits would be the 3%, thanks kimwp. I was thinking it was the full difference but that would take me to 53%, dur! 

Is that what would be fair then for me to lump sum overpay the half the difference between our deposits based on how we worked out the split?

I'll have a think. Am I right in thinking your 47% share comes from originally adding half the mortgage to your deposit and dividing that by the original house price?

whosthatgirl1989

kimwp said:

whosthatgirl1989 said:

We worked out the split by dividing the mortgage amount by 2 (because we are paying the mortgage and anything to do with the mortgage 50/50) and then adding our deposit to that amount then dividing that by the property price.

We have lived here nearly 4 years. Remortgaged after 2 and will be remortgaging again soon.

I'd not realised halving the difference between the two deposits would be the 3%, thanks kimwp. I was thinking it was the full difference but that would take me to 53%, dur! 

Is that what would be fair then for me to lump sum overpay the half the difference between our deposits based on how we worked out the split?

I'll have a think. Am I right in thinking your 47% share comes from originally adding half the mortgage to your deposit and dividing that by the original house price?

Thank you. Yes that's how we worked out the 47% & 53% share.

getmore4less

whosthatgirl1989 said:

Our last valuation when we remortgaged was £245k. Purchase price was £225k.

So I can buy the 3% off my partner by giving him 3% of our last valuation? £7,350.

If we want to do it as a lump sum overpayment it would be £7,350 from "him" and the same from me £7,350? So I'd be putting in £14,700 for us to be 50/50 paying it off the mortgage or £7,350 paying it to my partner? Is that right? I'm a bit confused to be honest   

Thanks for your help getmore4less.

Yep that's.

To have been even at the start you would have 53%:47%  == £119,250:£105.750
to be 50:50 you  upping your deposit by £6,750 and him having a £6,750 smaller one.

Does the £225k include all the purchase costs as well(many forget those),
if you paid separately  you should start with them added in.

Won't make a massive difference but if there were say £5k of fees paid 50:50 to add on.

You would have been splitting £230k   £121,750:£108,250  ==  52.93%:47.07% on £245k  that £7,178  ~£170

Also shows that if you rounded to get 53:47 you may want to have another look as each 0.1% is around £225 difference 

Might as well come to an agreement on all of this at the same time so you go forward at 50:50

 

kimwp

Ok, so I don't think I'm saying anything different to what has been said, but I thought laying it out might help:

- original house value: £225, split 53%:47% in ownership as that's how you would pay off the total including the deposit already paid (£119,250:£105,750).

- monthly payments have been split and will be split 50:50

- to have split the deposit equally, you would have needed to give your partner  (£119,250 - £105,750)/2 = £6750 at the time (to him, not into the mortgage - basically he paid £6750 on your behalf) 

1. If you want to even out the mortgage, then you pay him £6750 and carry on with 50:50 payments. To make it more even, then pay him a bit more to account for inflation if he would have spent the cash, interest if he would have put it in a savings account......however,

2. what he has done is invested it in property, which has increased in value. If you sold today, then your partner would get 53% of the value of the house today (minus his half of the outstanding mortgage). So you could buy the 3% off your partner by giving him 3% of today's value (or your last valuation if you prefer, which as you said would be 3% x £245,000 = £7,350.)

It really depends on whether you are both happy with him not getting any advantage from having invested the money, but you don't get disadvantaged from not having had that money to invest (option 1) or vice versa (option 2). Perhaps you could split the difference?

In terms of whether to do it as a lump sum overpayment, it's easiest to separate out paying him back/buying his 3% and paying into the mortgage. So if you agree that it is £7000 for the 3%, then you pay him the £7,000 and then pay an overpayment from both of you, as you said:

If we want to do it as a lump sum overpayment it would be £7,350 from "him" and the same from me £7,350? So I'd be putting in £14,700 for us to be 50/50 paying it off the mortgage or £7,350 paying it to my partner? Is that right? 

Make sure you consider any overpayment limits.