Unequal Shares - Is this correct?

IS2

getmore4less said:

theoretica said:

One way of working it out - if the house value rises.

At the moment of purchase you will have paid X% of house, your partner Y% and the bank Z%.  Say (9% you, 1% partner and 90% bank to make the concept easy).

So look at the new higher value -10% of it was bought with deposits, 90% with a mortgage.  9% of it to you is your initial deposit back + a the share of the equity it bought.  1% to your partner - likewise.  Then the 90% bought with the mortgage was equal between you both financially and that neither of you could have bought without the other - pay off the bank and split the remaining equity equally.  It's not a neat percentage split or amount paid but it acknowledges both contributions and the difference between the deposit and the mortgage.

It is a neat %. (54%:46%)

The mistake many make is taking the mortgage off first then trying to work out a split, when you take you share of the debt from your share of the property.

If there is not enough then there ends up being a residual debt between the parties.

Does this work in terms of if property increases in price? If I had put it the higher intial deposit? Is this the right way of working it out?

Example: If P1 & P2 split in two years time and P2 has paid 588/2 * 24 = 7056. P1 pays P2 this sum and then makes 100% of repayments of future mortgage, with 100% equity being granted to him. 

If the property had increased in value by 10%, then P1 would pay P2s unequal share percentage ( deposit original sum + half of mortgage payments to date) * 10% 

getmore4less

IS2 said:

getmore4less said:

theoretica said:

One way of working it out - if the house value rises.

At the moment of purchase you will have paid X% of house, your partner Y% and the bank Z%.  Say (9% you, 1% partner and 90% bank to make the concept easy).

So look at the new higher value -10% of it was bought with deposits, 90% with a mortgage.  9% of it to you is your initial deposit back + a the share of the equity it bought.  1% to your partner - likewise.  Then the 90% bought with the mortgage was equal between you both financially and that neither of you could have bought without the other - pay off the bank and split the remaining equity equally.  It's not a neat percentage split or amount paid but it acknowledges both contributions and the difference between the deposit and the mortgage.

It is a neat %. (54%:46%)

The mistake many make is taking the mortgage off first then trying to work out a split, when you take you share of the debt from your share of the property.

If there is not enough then there ends up being a residual debt between the parties.

Does this work in terms of if property increases in price? If I had put it the higher intial deposit? Is this the right way of working it out?

Example: If P1 & P2 split in two years time and P2 has paid 588/2 * 24 = 7056. P1 pays P2 this sum and then makes 100% of repayments of future mortgage, with 100% equity being granted to him. 

If the property had increased in value by 10%, then P1 would pay P2s unequal share percentage ( deposit original sum + half of mortgage payments to date) * 10% 

You ignore the mortgage payment it is the outstanding debt that matters

lets go with a simple case 

total purchase costs £100k
P1 £9k
P2 £1k
Mortgage £90k(£45k each)

2 years later mortgage is now £85k   £42,500 each

net value of house is £110k  (from sale or agreed as the value for the buyout.

P2 owned   £45k+1k = 46% at the start

they are due £50,600 of the £110k, less their share of the mortgage(£42,500)
 
To buy out P2, P1 hands over £8,100.


The interest is the cost of servicing the debt to buy an asset independent of the asset value

To see where using the debt payment breaks down is the £50k cash and £50k borrowed.

P1 £50k cash
P2 £50k borrowed at 10% over 10 years and they pay all of it.

clearly owned 50:50

At year 10 property has gone up 50%  now worth £150k, £75k each 

P2 has paid £79,290 in debt payments 

using this algorithm

If the property had increased in value by 10%, then P1 would pay P2s unequal share percentage ( deposit original sum + half of mortgage payments to date) * 10% 

Assuming you actually meant a 10% increase and not 10% of the total.

P1 is now paying P2 £79,290 * 1.5 = £118,875

IS2

getmore4less said:

IS2 said:

getmore4less said:

theoretica said:

One way of working it out - if the house value rises.

At the moment of purchase you will have paid X% of house, your partner Y% and the bank Z%.  Say (9% you, 1% partner and 90% bank to make the concept easy).

So look at the new higher value -10% of it was bought with deposits, 90% with a mortgage.  9% of it to you is your initial deposit back + a the share of the equity it bought.  1% to your partner - likewise.  Then the 90% bought with the mortgage was equal between you both financially and that neither of you could have bought without the other - pay off the bank and split the remaining equity equally.  It's not a neat percentage split or amount paid but it acknowledges both contributions and the difference between the deposit and the mortgage.

It is a neat %. (54%:46%)

The mistake many make is taking the mortgage off first then trying to work out a split, when you take you share of the debt from your share of the property.

If there is not enough then there ends up being a residual debt between the parties.

Does this work in terms of if property increases in price? If I had put it the higher intial deposit? Is this the right way of working it out?

Example: If P1 & P2 split in two years time and P2 has paid 588/2 * 24 = 7056. P1 pays P2 this sum and then makes 100% of repayments of future mortgage, with 100% equity being granted to him. 

If the property had increased in value by 10%, then P1 would pay P2s unequal share percentage ( deposit original sum + half of mortgage payments to date) * 10% 

You ignore the mortgage payment it is the outstanding debt that matters

lets go with a simple case 

total purchase costs £100k
P1 £9k
P2 £1k
Mortgage £90k(£45k each)

2 years later mortgage is now £85k   £42,500 each

net value of house is £110k  (from sale or agreed as the value for the buyout.

P2 owned   £45k+1k = 46% at the start

they are due £50,600 of the £110k, less their share of the mortgage(£42,500)
 
To buy out P2, P1 hands over £8,100.


The interest is the cost of servicing the debt to buy an asset independent of the asset value

To see where using the debt payment breaks down is the £50k cash and £50k borrowed.

P1 £50k cash
P2 £50k borrowed at 10% over 10 years and they pay all of it.

clearly owned 50:50

At year 10 property has gone up 50%  now worth £150k, £75k each 

P2 has paid £79,290 in debt payments 

using this algorithm

If the property had increased in value by 10%, then P1 would pay P2s unequal share percentage ( deposit original sum + half of mortgage payments to date) * 10% 

Assuming you actually meant a 10% increase and not 10% of the total.

P1 is now paying P2 £79,290 * 1.5 = £118,875

Thanks so much! Do you have a simple equation for this. 

Would it be the below? My maths is terrible and this is complicated and solicitors seem to just do what I suggest...

Unequal shares = Deposit + essential repairs each as % of property value at purchase

In event of sale: Unequal shares are returned to each person before mortgage repayment. Each person then repays mortgage costs out of their respective share. 

In event of buyout: Person being bought out gets their unequal share of current property price - their share of mortgage left = difference to be paid to be bought out. 

So in my case it would be

Property price 209,000
P1: £39,215 deposit + £10,000 repairs (23.55%)
P2: £2,585 deposit (1.24%)
Mortgage is £167, 200 as % left over would be 75.21% (37.60% each)

So total unequal shares would be:
P1: 61.15%
P2: 38.84%


Property price increases to 219000
Mortgage remaining is now 160,000 (80,000 each)
P2 gets 38.84% of 219000 (£85,059) - £80,000 remaining mortgage, leaving £5,059
P1 would pay P2 £5,059 to buy them out and then take all 100% of future repayments/mortgage equity and own the full house/future mortgage.

IS2

IS2 said:

getmore4less said:

IS2 said:

getmore4less said:

theoretica said:

One way of working it out - if the house value rises.

At the moment of purchase you will have paid X% of house, your partner Y% and the bank Z%.  Say (9% you, 1% partner and 90% bank to make the concept easy).

So look at the new higher value -10% of it was bought with deposits, 90% with a mortgage.  9% of it to you is your initial deposit back + a the share of the equity it bought.  1% to your partner - likewise.  Then the 90% bought with the mortgage was equal between you both financially and that neither of you could have bought without the other - pay off the bank and split the remaining equity equally.  It's not a neat percentage split or amount paid but it acknowledges both contributions and the difference between the deposit and the mortgage.

It is a neat %. (54%:46%)

The mistake many make is taking the mortgage off first then trying to work out a split, when you take you share of the debt from your share of the property.

If there is not enough then there ends up being a residual debt between the parties.

Does this work in terms of if property increases in price? If I had put it the higher intial deposit? Is this the right way of working it out?

Example: If P1 & P2 split in two years time and P2 has paid 588/2 * 24 = 7056. P1 pays P2 this sum and then makes 100% of repayments of future mortgage, with 100% equity being granted to him. 

If the property had increased in value by 10%, then P1 would pay P2s unequal share percentage ( deposit original sum + half of mortgage payments to date) * 10% 

You ignore the mortgage payment it is the outstanding debt that matters

lets go with a simple case 

total purchase costs £100k
P1 £9k
P2 £1k
Mortgage £90k(£45k each)

2 years later mortgage is now £85k   £42,500 each

net value of house is £110k  (from sale or agreed as the value for the buyout.

P2 owned   £45k+1k = 46% at the start

they are due £50,600 of the £110k, less their share of the mortgage(£42,500)
 
To buy out P2, P1 hands over £8,100.


The interest is the cost of servicing the debt to buy an asset independent of the asset value

To see where using the debt payment breaks down is the £50k cash and £50k borrowed.

P1 £50k cash
P2 £50k borrowed at 10% over 10 years and they pay all of it.

clearly owned 50:50

At year 10 property has gone up 50%  now worth £150k, £75k each 

P2 has paid £79,290 in debt payments 

using this algorithm

If the property had increased in value by 10%, then P1 would pay P2s unequal share percentage ( deposit original sum + half of mortgage payments to date) * 10% 

Assuming you actually meant a 10% increase and not 10% of the total.

P1 is now paying P2 £79,290 * 1.5 = £118,875

Thanks so much! Do you have a simple equation for this. 

Would it be the below? My maths is terrible and this is complicated and solicitors seem to just do what I suggest...

Unequal shares = Deposit + essential repairs each as % of property value at purchase

In event of sale: Unequal shares are returned to each person before mortgage repayment. Each person then repays mortgage costs out of their respective share. 

In event of buyout: Person being bought out gets their unequal share of current property price - their share of mortgage left = difference to be paid to be bought out. 

So in my case it would be

Property price 209,000
P1: £39,215 deposit + £10,000 repairs (23.55%)
P2: £2,585 deposit (1.24%)
Mortgage is £167, 200 as % left over would be 75.21% (37.60% each)

So total unequal shares would be:
P1: 61.15%
P2: 38.84%


Property price increases to 219000
Mortgage remaining is now 160,000 (80,000 each)
P2 gets 38.84% of 219000 (£85,059) - £80,000 remaining mortgage, leaving £5,059
P1 would pay P2 £5,059 to buy them out and then take all 100% of future repayments/mortgage equity and own the full house/future mortgage.

Getmore4less - is this correct?

getmore4less

The total cost of the place is £209k+£10k + other fees

You have workout the % on £209 and just used what's left for the mortgage which is wrong.

mortgage is £167,200/£219,000  £76.35%  other % need adjusting as well.

The clue was the deposit + 1/2 the reduction in mortgage was £6185 they should be getting at least that back unless the property has lost value


Once you factor in buying and selling cost that can happen but not clear if you have done that and using net proceeds as £219 there is no drop.