Trust Deed with different deposits

Lydia84

I’m so confused. Basically buying a house with my partner we’re not married and he has a child from a previous relationship. We’ve agreed as tenants in common and I will do a trust deed to protect my money as my deposit is just over double his. We agree to pay the same mortgage amount each month to keep it simpler to keep track of things. He earns double my salary. 

He has suggested I protect my money as the value it currently stands, so I’m putting in X amount, then if we parted ways, after mortgage is redeemed and fees paid, if we sold the house, I would get my X amount of deposit, he gets his, then the remaining equity (if any) is split 50:50

my issue with this is, let’s say we parted in 20-30 years time. That x amount for my deposit is still worth x amount and hasn’t made any gains. I suggested doing it as a percentage so that I get back the same investment, or the equity left would be split based on the difference I’m putting in, if we split it into parts, I’m basically putting in two thirds of our current deposit (a grand extra infact) so if we split should I expect to get two thirds of the equity back? Since we will pay the same amount ot the mortgage off? Or is that not fair?

basically house value is 313,500, my deposit is 65, his is 32, I just need to know how to do this so I’m not selling myself short of the worse happened and doing myself out of thousands in years to come if we split up. 

He doesn’t get my rationing at all by the way and says it’s too hard to work out the maths behind doing things as a share amount, he’s an accountant, my maths is awful! 

JadEle

It sounds to me as though;
     you are putting a deposit of £65k of £313.5K (20.7%)
     partner puts in a deposit of £32k of £313.5K (10.2%)

    you both share the mortgage equally (216.5K of £313.5K, 69%)

I would think then upon selling the house;
   you would get: (69%/2 - montage contributions) + (20.7% - deposit) = 55.25%
   partner gets: (69%/2 - montage contributions) + (10.2% - deposit) = 44.75%

I hope this helps, it will be interesting to see what others think is appropriate. 

JGB1955

So... you've paid 20.73% deposit on the house (65/313.5) - he's paid 32/313.5 (10.21%).  You're each now going to pay 50% of the balance (34.53% each), so, your future ownership of the house wlll be split 55.26% (you) and 44.74% (him).  Simple!

Lydia84

Hi,

thank you! Interesting that you both came out with the same equation! My other half had come out with exactly this too! Do you think this is the fairest way to do it?

My worry is if the market crashes then I could loose all my savings. 

Would it protect my money in the event prices fall if I didn’t do it as a percentage share and just asked for the 65k back if we split up? 

The surveyor has already downvalued the house by 7k and It’s not a dooer upper so can’t see us adding much worth to it. 

MWT

Lydia84 said:

Would it protect my money in the event prices fall if I didn’t do it as a percentage share and just asked for the 65k back if we split up? 

It doesn't protect you in the event of a fall in value, nor should it do so.

It is not equitable to want to participate in the upside but not take the hit on the downside.

Either go for the percentage basis which fairly splits both gains and losses, or if your partner is willing, agree to just receive back your deposit without any growth.

It would not be fair to expect both...

Lydia84

That makes sense, I wouldn’t expect both, which do you think is the more sensible option? I’m thinking maybe with the market as it is, to not go for the percentage option? 

getmore4less

The get your deposit back is the same as an interest free loan of 1/2 the difference.

As partner has a much higher income a side loan (65-32)/2=£16.5k could work.

Own 50:50 and he just pays you back that £16.5k asap.(with or without a bit of interest)

The other option is he just pays more of the mortgage to balance back to 50:50

£156.75k each

£65+£91.75
£32+£124.75
Mortgage split 42.4:57.6

Don't forget all purchase costs should be included not just the purchase price.

Is he likely to want to overpay more than you?