Tennants in Common mathematical question!

zipp

Hi everyone, hope you're all doing well.
My partner and I bought a flat eight years ago.
He put two thirds of the large deposit (200k split between us) and I put a third so we did a declaration of trust that states that he owns two thirds of said property and I own a third of it.
We have been splitting the mortgage repayments 50/50 and all maintenance costs such as roof works etc 50/50. I also made a large overpayment  (15k) to the mortgage in order to keep my third share balance a couple of years ago.
Yesterday we were going over finances and it occurred to us that as we have been paying everything 50/50 this alters my investment in the flat
(as if we had stuck to me paying one third of mortgage payments and outgoings that would have reflected my one third share in the property?)
We were trying to work it out how we can make it fair say if we sell should I take a larger share of the profit than one third etc but it boggled our brains !
So if there is anyone who is mathematically attuned and would help us with this equation we would be most grateful! 
zipp

saajan_12

zipp said:

Hi everyone, hope you're all doing well.
My partner and I bought a flat eight years ago.
He put two thirds of the large deposit (200k split between us) and I put a third so we did a declaration of trust that states that he owns two thirds of said property and I own a third of it. - well you've paid for the deposit portion in 2:1 split, how much of the purchase price does that represent? 
We have been splitting the mortgage repayments 50/50 and all maintenance costs such as roof works etc 50/50. - okay, so you're immediately paying more than 33% of the whole purchase price. Some maintenance / mortgage interest might just be the cost of living there which might be reasonable to split 50/50, but major works should be based on the ownership split. I also made a large overpayment  (15k) to the mortgage in order to keep my third share balance a couple of years ago. - the 33% deposit + 50% mortgage meant you were paying MORE than a third, so why did you make a further overpayment? Unless, had you got behind or paid less at some point?
Yesterday we were going over finances and it occurred to us that as we have been paying everything 50/50 this alters my investment in the flat - yes!
(as if we had stuck to me paying one third of mortgage payments and outgoings that would have reflected my one third share in the property?)
We were trying to work it out how we can make it fair say if we sell should I take a larger share of the profit than one third etc but it boggled our brains ! 
So if there is anyone who is mathematically attuned and would help us with this equation we would be most grateful! 
zipp

First, what was the purchase price? 
You've paid 33% of deposit + 50% of mortgage, so work that out as a % of the total purchase price. 
That's the share of the property value you've paid for, either by cash upfront or via mortgage. When you sell, if there's still a mortgage balance, you each pay for 50% of the outstanding mortgage out of your share of the property value. 

That way you each get any appreciation (or depreciation) on your shares, pay the interest on the parts you each borrowed, etc. 

For major work, ideally keep paying those in the same % that you own the house. 

gettingtheresometime

My take is that you initially had 33% of the equity in the flat.
So let's call the  initial equity X. Therefore you had X/3.
Then you had 50% of any subsequent equity - represented by the 50/50 mortgage payments. So your share of that equity is ((Y-X)/2) where Y is the value of the flat
However things have got complicated with your lump sum overpayment, 
So my reckoning your equity is equal to 
(X/3) + ((Y-X)/2) +£15K

verytired11

I also made a large overpayment  (15k) to the mortgage in order to keep my third share balance a couple of years ago.
What do you mean by this?  If you are paying 50% of the mortgage then you are overpaying your balance already.  Surely your partner should have put in an overpayment to keep his two third balance?

getmore4less

zipp said:

Hi everyone, hope you're all doing well.
My partner and I bought a flat eight years ago.
He put two thirds of the large deposit (200k split between us) and I put a third so we did a declaration of trust that states that he owns two thirds of said property and I own a third of it.
...............

Woops you got that wrong at the start should have take account of all cost and the share of the mortgage

We have been splitting the mortgage repayments 50/50 and all maintenance costs such as roof works etc 50/50. 
As the mortgage was being paid 50:50 that should have been included in working out the shares
the mortgage is relatively easy to sort out 
timing of the improvements makes it messy 

So if there is anyone who is mathematically attuned and would help us with this equation we would be most grateful! 

can do the alternative calculation to retrospectively sort out proper shares.
Need the full time line of amounts in and when  including the purchase costs because looks like you missed those off at the start as well.

it will be hard to get very accurate as you will ne intermediate valuations for some of the inputs but can get close with some basic assumptions.

Pop some real numbers up and I can put something together.
There are a few ways to do this depending on timescales and cash numbers within the 8 years period some work better than others when simplifying.

TBagpuss

What was the purchase price of the property?
What did each of you actually pay fo the deposit?
What was the house worth when you made your £15K investment?

Once you have those numbers you/we can work out the split. .

FaceHead

You have been living in a flat with the same person for 8 years, and you've obviously known them for longer. At this stage, you might consider getting married/a civil partnership, and simply combining what you have. 

getmore4less

TBagpuss said:

What was the purchase price of the property?
What did each of you actually pay fo the deposit?
What was the house worth when you made your £15K investment?

Once you have those numbers you/we can work out the split. .

There is the maintenance and improvements to factor in.

coffeehound

Maybe I'm underthinking it, but can't you just work out each of your total payments to date, and apply the resulting ratio to whatever the flat might be worth at a given time?
You could set up a simple spreadsheet to record each of your payments as you go along which can then calculate the exact split as time goes on.  Inflation has been negligible over the eight years.  The only debating point might be what you choose to count towards the property's value.

getmore4less

coffeehound said:

Maybe I'm underthinking it, but can't you just work out each of your total payments to date, and apply the resulting ratio to whatever the flat might be worth at a given time?
You could set up a simple spreadsheet to record each of your payments as you go along which can then calculate the exact split as time goes on.  Inflation has been negligible over the eight years.  The only debating point might be what you choose to count towards the property's value.

That fails because there is debt being serviced.

coffeehound

getmore4less said:
That fails because there is debt being serviced.

But the costs of servicing the debt are included in the totals that each partner has paid