How much should my future ex get from the sale of the house?

JaneTheCat

Greetings, and thanks for any advice anybody can give me here. I am going to over simplify the maths in my 'story', and have a question or two I hope somebody can help me with. 

The situation is very simple. I was married a number of years to a lovely man, but the marriage ended this Christmas. We are friends, there are no issues, there are no children to consider - all is good! The only asset we have is £50,000 equity in the house worth £200,000. We agreed straight away that we should have 50% of that each - so, in today's money, about £25,000 each. Simple. 

However, it was decided that I should keep living in the house, and he went and rented a flat - both of us were happy with that. He does not pay any of the mortgage or upkeep of the house anymore as was agreed between us. It was also agreed that his £25,000 stake should remain in the property until I sell it. I intend to sell it in 3 years time. 

However, in three years time I will have paid an extra £18,000 into the house - £9000 as repayment of the capitol and £9000 in interest. 

So, my questions are:

1. What is the NORMAL way of dividing the equity when the property is sold given the facts above?! For sake of argument, let us imagine that the property sells for £220,000 in three years time.

2. If I overpay the mortgage, as I have been doing during the marriage, would that increase my % of the equity? 

Any help and advice would be appreciated, for both of us - we are both adamant we don't want solicitors or anything, so this will all be done amicably between us - and we would BOTH value your advice. 

J X

Doozergirl

He'll also be paying rent that he may not have to pay if he had his equity out of the property now.  Presumably there is some personal benefit to you of not selling the house immediately? Rent is proportionally more expensive than a mortgage as a % of house price, with interest rates being so low.  You may also stop him doing something with that money - he doesn't know where he will be in 2 years.  

Personally, I think that the house would be better either being sold immediately, but failing that, you continue on the 50/50 trajectory.  

You can have some agreement that your overpayments going forward will count as yours - but for the sake of simplicity and 3 years, I'd probably put those overpayments into a savings account from now on and they can go into the deposit on your next place.  

I've read plenty of threads on here from people whose ex partners live in the old house.  The one who moves out ends up trapped even though they thought they were doing the right thing in the first place.  I can't recall such threads from the one that remains.  It is a sacrifice for him - maybe not this minute but perhaps sooner than he thinks.  

SavingPennies_2

Is there a particular reason for waiting 3 years? If you can then I'd sell now and make a clean break. He will be "losing out" by paying rent for 3 years, which will probably cost him more than half the mortgage repayments would have, plus a lot can change/ happen in that time, eg one or both of you meeting someone else and wanting to buy together, and being tied to this house may hold you or him back. Personally when I split we both wanted to sell asap and make a clean start even though waiting a bit longer might have been slightly more financially beneficial (we were also on good terms, if anything more reason to do it now while you still are amicable).

p00hsticks

I second what Doozergirl says - keep it as a 50/50 split of the equity. You may be putting more money in between now and when it comes to sell, but you are also getting to live in the property rent free, whilst he has additional rental expenses and cannot realise his asset.

If you intend to count the mortgage payments gonig forward as something you are having to pay out and that should increase your share of the equity, then by equal measure to be fair you should be factoring in a payment to him for you effectively 'renting; his half of the property from him.

JaneTheCat

Thanks so far for the answers, to answer Doozer and Saving: It currently serves us both well not to sell for three years for a variety of reasons to do with work locations, mortgage details, etc - I understand the idea that our situations might change of course! 

MovingForwards

Whatever you agree, get a solicitor to draft it as a lot can change in 3 years.

I agree with the others saying sell now and get it done to free both of you. 

If you insist on staying, don't OP and keep the money in a regular saver or something, use it towards your next property.

I'm assuming there's ERCs if you sold now? I'm not sure if one of you would be able to port the mortgage onto a new property, while removing the other, or whether affordability on one income would make it a no-go.

JaneTheCat

Thanks MF, yes there is ERC if we sold now - and other reasons mean we can't sell. However, I am already getting a good grasp of what I should do from what you are all saying:

1. Don't overpay - put any extra payments into savings
2. Sell as quickly as we can
3. Keep equity at 50:50 or very close to that if we both agree

TBagpuss

The normal way would be that you work out his share as a % of the current value - so £25,000 as a % of £200,000.
This works out at 12.5%.

If when you sell, the house is worth £220,000 then he would get 12.5% of that , so would get £27,500.

You can think of it as him investing his £25,000 in the house. He get the benefits of any increase in value of the property (and shares the risk if property prices fall) but doesn't benefit rom you paying down the mortgage and, equally, wouldn't lose out if you were to miss payments or increase the debt. If you were to overpay the mortgage then that would not affect him, as his percentage is calculated based on the gross value of the property and the amount e is leaving invested in it. 

Of course, he might prefer to have his money out now, to be able to put it down as a deposit and buy a new property, but if he is willing to wait, then this is the most common way of doing it, it's how a court would normally set up an order where a house isn't being sold immediately 


normally there would be provisions in the order to require you to maintain the property (i.e. not let it deteriorate and lose value) and if you planned any works that might increase its value you would need to be aware that, in the absence of a further agreement to the contrary, he would get a share of that increased value.(although given you are looking at relatively small amounts of money, if you were in a position to fund significant changes you'd probably be better using the money to pay him out then planning any changes one the property was yours!) 

Amixo3032

I had a mortgage for over 25 yrs with my ex He cheated and I wanted to sell up and go into rented , he only had £15,000 out of the house sale , I got £210,000 as I paid all the mortgage off early. 

so if I was you if you want more I’d pay it off earlier if I was you 

getmore4less

The normal way would be that you work out his share as a % of the current value - so £25,000 as a % of £200,000.

This works out at 12.5%.

If when you sell, the house is worth £220,000 then he would get 12.5% of that , so would get £27,500.

Good summary

You can decide if any adjustments needed for living in his 12.5% in the mean time.

Or if there needs to be any adjustments for things like unequal deposit it input during the shared period.

PadreM

JaneTheCat said:

Greetings, and thanks for any advice anybody can give me here. I am going to over simplify the maths in my 'story', and have a question or two I hope somebody can help me with. 

The situation is very simple. I was married a number of years to a lovely man, but the marriage ended this Christmas. We are friends, there are no issues, there are no children to consider - all is good! The only asset we have is £50,000 equity in the house worth £200,000. We agreed straight away that we should have 50% of that each - so, in today's money, about £25,000 each. Simple. 

However, it was decided that I should keep living in the house, and he went and rented a flat - both of us were happy with that. He does not pay any of the mortgage or upkeep of the house anymore as was agreed between us. It was also agreed that his £25,000 stake should remain in the property until I sell it. I intend to sell it in 3 years time. 

However, in three years time I will have paid an extra £18,000 into the house - £9000 as repayment of the capitol and £9000 in interest. 

So, my questions are:

1. What is the NORMAL way of dividing the equity when the property is sold given the facts above?! For sake of argument, let us imagine that the property sells for £220,000 in three years time.

2. If I overpay the mortgage, as I have been doing during the marriage, would that increase my % of the equity? 

Any help and advice would be appreciated, for both of us - we are both adamant we don't want solicitors or anything, so this will all be done amicably between us - and we would BOTH value your advice. 

J X

I THINK that as he has a 12.5% stake in the house NOW (25k of 200k value) it's reasonable that he retains that percentage stake when you sell.  He is no longer contributing to the house via mortgage or rent so I cannot see how another % could be arrived at.  It seems he accepts that proportion...

So it's not as complicated as you imagine...  Whatever sum you put into the house from now on is your sole equity.  He's put in 12.5% to date (as have you): he merely continues to enjoy that 12.5% in future (inc if prices dropped!).  So you aren't, of course, agreeing an amount but a % or proportion.

If I were you, avoiding solicitor, I would sign a formal letter to him undertaking to pay him 12.5% of the NET proceeds of sale (ie, what you get after estate agent fee and legal costs, but not other costs such as removals).  Now, if he's content to receive money at some unspecified date in the future and has no legal claim over you or the house, fine, but if he suddenly wanted/needed his stake before the house was sold, what would you do?  Tell him 'tough'?  He may want a limit set on by when he gets money, and that should be mentioned in your letter (ideally witnessed by someone else too).  Also, if you both consider this a debt you must honour (which you seem to), you would need to have a will and have this included, in case anything happened to you.

Because the place is mortgaged you may need advice as to legal implication in taking it on solely (unless you were the sole mortgagor).