Strange situation

Noneforit999

getmore4less said:

Exodi said:

Brie said:

Whether you can get around this by buying shares in the house you with cash and she with a mortgage may be a possibility but again the solicitor should be able to advise.  Perhaps this is what Exodi refers to in owning it as tenants in common.

It's not as complicated as you think.

If the house is £220k, he has £110k and she has £10k - they would jointly apply for a mortgage for £100k (as they have £120k deposit) - they should get a decent product with a low LTV of ~45%. That's it from the lenders perspective - they don't care about the arrangement between the owners.

OP would inform their solicictor that they want to hold the property as tenants in common instead of joint tenants (which basically means they want to own the property differently than just 50/50). They could then have a deed of trust drawn up with the solicitor which gives the details on how they want money to be shared up if the house is sold.

It could be along the lines of 'Person A gets £110k back, Person B gets £10k back, and the remaining equity is split 50/50'.

It's actually all very simple - but the core point I don't think he'll get away from is needing to be on the mortgage as a borrower.

That's a very poor way to do it.

The one putting 1/2 the money down never sees 1/2 the rise/fall in  in value

That is a rather black and white way to look at it. I earn 4x what my Wife does so does that mean I should get 4x the increase in value when we sell the house then?

The reality is, relationships/marriages are not black and white, even financially and if you go into the process with that mindset, its doomed for failure in my opinion.  

newdriver101

Noneforit999 said:

getmore4less said:

Exodi said:

Brie said:

Whether you can get around this by buying shares in the house you with cash and she with a mortgage may be a possibility but again the solicitor should be able to advise.  Perhaps this is what Exodi refers to in owning it as tenants in common.

It's not as complicated as you think.

If the house is £220k, he has £110k and she has £10k - they would jointly apply for a mortgage for £100k (as they have £120k deposit) - they should get a decent product with a low LTV of ~45%. That's it from the lenders perspective - they don't care about the arrangement between the owners.

OP would inform their solicictor that they want to hold the property as tenants in common instead of joint tenants (which basically means they want to own the property differently than just 50/50). They could then have a deed of trust drawn up with the solicitor which gives the details on how they want money to be shared up if the house is sold.

It could be along the lines of 'Person A gets £110k back, Person B gets £10k back, and the remaining equity is split 50/50'.

It's actually all very simple - but the core point I don't think he'll get away from is needing to be on the mortgage as a borrower.

That's a very poor way to do it.

The one putting 1/2 the money down never sees 1/2 the rise/fall in  in value

That is a rather black and white way to look at it. I earn 4x what my Wife does so does that mean I should get 4x the increase in value when we sell the house then?

The reality is, relationships/marriages are not black and white, even financially and if you go into the process with that mindset, its doomed for failure in my opinion.  

You + your wife are married so the starting point (and end point) would be different.  
Crucially here, the OP is not married and has asked for opinions on how to structure a purchase with girlfriend when both are contributing significantly different amounts in deposits.
I agree relationships are not black + white, but there are so many posts on how relationships have gone sour and couples arguing over the split when one paid more etc. etc. so agreeing on how the rise/fall will be dealt with when you have an unmarried couple with varying deposits is very important in this particular scenario…

getmore4less

Noneforit999 said:

getmore4less said:

Exodi said:

Brie said:

Whether you can get around this by buying shares in the house you with cash and she with a mortgage may be a possibility but again the solicitor should be able to advise.  Perhaps this is what Exodi refers to in owning it as tenants in common.

It's not as complicated as you think.

If the house is £220k, he has £110k and she has £10k - they would jointly apply for a mortgage for £100k (as they have £120k deposit) - they should get a decent product with a low LTV of ~45%. That's it from the lenders perspective - they don't care about the arrangement between the owners.

OP would inform their solicictor that they want to hold the property as tenants in common instead of joint tenants (which basically means they want to own the property differently than just 50/50). They could then have a deed of trust drawn up with the solicitor which gives the details on how they want money to be shared up if the house is sold.

It could be along the lines of 'Person A gets £110k back, Person B gets £10k back, and the remaining equity is split 50/50'.

It's actually all very simple - but the core point I don't think he'll get away from is needing to be on the mortgage as a borrower.

That's a very poor way to do it.

The one putting 1/2 the money down never sees 1/2 the rise/fall in  in value

That is a rather black and white way to look at it. I earn 4x what my Wife does so does that mean I should get 4x the increase in value when we sell the house then?

The reality is, relationships/marriages are not black and white, even financially and if you go into the process with that mindset, its doomed for failure in my opinion.  

Its not about what you earn its about what is getting put in.

The important part is understanding what is going on not go in blind which many do.


If you paid  4/5 of a deposit and paid 4/5 of the mortgage what is fare for a split then when it goes belly up.

Exodi

getmore4less said:

Exodi said:

getmore4less said:

Exodi said:

Brie said:

Whether you can get around this by buying shares in the house you with cash and she with a mortgage may be a possibility but again the solicitor should be able to advise.  Perhaps this is what Exodi refers to in owning it as tenants in common.

It's not as complicated as you think.

If the house is £220k, he has £110k and she has £10k - they would jointly apply for a mortgage for £100k (as they have £120k deposit) - they should get a decent product with a low LTV of ~45%. That's it from the lenders perspective - they don't care about the arrangement between the owners.

OP would inform their solicictor that they want to hold the property as tenants in common instead of joint tenants (which basically means they want to own the property differently than just 50/50). They could then have a deed of trust drawn up with the solicitor which gives the details on how they want money to be shared up if the house is sold.

It could be along the lines of 'Person A gets £110k back, Person B gets £10k back, and the remaining equity is split 50/50'.

It's actually all very simple - but the core point I don't think he'll get away from is needing to be on the mortgage as a borrower.

That's a very poor way to do it.

The one putting 1/2 the money down never sees 1/2 the rise/fall in  in value

I've noticed that no matter the context of the thread, you always suggest DoT arrangements that prioritise the person putting in the most.

Dare I guess that you have a DoT with someone, have contributed more and have some 'creative' terms in it to ensure you're 'well compensated' in the event of a break up?

If a place was bought cash 75:25 using the get your money back with increases spit 50:50 is that fair?

That is what you are suggesting when you do a proper analysis of edge cases with the algorithm.

From this and your other posts on this point, I think the main takeaway is that you suggest having initital contributions aligned with the house value (please don't think I'm suggesting this isn't reasonable or valid). To confirm, do you mean something like Scenario 2 in the below?

---

Person A puts in an initial contribution of £80k, Person B puts in an initital contribution of £10k. The house is valued at £200k and a mortgage of £110k is taken out.

After 1 year the couple decide to sell. The property has increased in value to £220k and the mortgage balance is now £100k, meaning £120k equity.

Scenario 1

Person A gets their initial £80k back, person B gets their initial £10k back. They then split the remaining £30k equity in half, meaning Person A gets £95k in total and person B gets £25k in total.

Scenario 2

They calculate that Person A contributed £85k in equity (£80k initial + £5k mortgage principle), and Person B contributed £15k in equity (£10k inital + £5k mortgage principle. They agree to split any equity in line with their equitable contributions. This means Person A gets £102k (85% of £120k) in total and person B gets £18k in total (15% of £120k).

---

This assumes that they split the mortgage payments equally. As I said above, I don't challenge that scenario 2 (or something along the same lines) is reasonable or valid. Though there is the difficulty of calculating it - especially if you want to consider that equity positions have changed over time - Scenario 2 just calculates equity at one point. I remember my solicitor putting to me that Deeds of Trust should be simple and extremely clear in their calculations, else they may be difficult to ever enforce - you see where I'm going with this... if you're trying to email your 'Year on year percentage gross equity calculations' excel sheet to a judge - funny in principal, notsomuch in practice.

To ensure we're being reasonable - in a negative equity scenario, in line with the manner of Scenario 1, they'd both lose 50/50. In line with the manner of Scenario 2, Person A would lose a far greater amount. You can't have your cake and eat it, Person A couldn't suggest that any gains they should get the lions share of while any losses they should share evenly.

getmore4less

Exodi said:

getmore4less said:

Exodi said:

getmore4less said:

Exodi said:

Brie said:

Whether you can get around this by buying shares in the house you with cash and she with a mortgage may be a possibility but again the solicitor should be able to advise.  Perhaps this is what Exodi refers to in owning it as tenants in common.

It's not as complicated as you think.

If the house is £220k, he has £110k and she has £10k - they would jointly apply for a mortgage for £100k (as they have £120k deposit) - they should get a decent product with a low LTV of ~45%. That's it from the lenders perspective - they don't care about the arrangement between the owners.

OP would inform their solicictor that they want to hold the property as tenants in common instead of joint tenants (which basically means they want to own the property differently than just 50/50). They could then have a deed of trust drawn up with the solicitor which gives the details on how they want money to be shared up if the house is sold.

It could be along the lines of 'Person A gets £110k back, Person B gets £10k back, and the remaining equity is split 50/50'.

It's actually all very simple - but the core point I don't think he'll get away from is needing to be on the mortgage as a borrower.

That's a very poor way to do it.

The one putting 1/2 the money down never sees 1/2 the rise/fall in  in value

I've noticed that no matter the context of the thread, you always suggest DoT arrangements that prioritise the person putting in the most.

Dare I guess that you have a DoT with someone, have contributed more and have some 'creative' terms in it to ensure you're 'well compensated' in the event of a break up?

If a place was bought cash 75:25 using the get your money back with increases spit 50:50 is that fair?

That is what you are suggesting when you do a proper analysis of edge cases with the algorithm.

From this and your other posts on this point, I think the main takeaway is that you suggest having initital contributions aligned with the house value (please don't think I'm suggesting this isn't reasonable or valid). To confirm, do you mean something like Scenario 2 in the below?

---

Person A puts in an initial contribution of £80k, Person B puts in an initital contribution of £10k. The house is valued at £200k and a mortgage of £110k is taken out.

After 1 year the couple decide to sell. The property has increased in value to £220k and the mortgage balance is now £100k, meaning £120k equity.

Scenario 1

Person A gets their initial £80k back, person B gets their initial £10k back. They then split the remaining £30k equity in half, meaning Person A gets £95k in total and person B gets £25k in total.

Scenario 2

They calculate that Person A contributed £85k in equity (£80k initial + £5k mortgage principle), and Person B contributed £15k in equity (£10k inital + £5k mortgage principle. They agree to split any equity in line with their equitable contributions. This means Person A gets £102k (85% of £120k) in total and person B gets £18k in total (15% of £120k).

---

This assumes that they split the mortgage payments equally. As I said above, I don't challenge that scenario 2 (or something along the same lines) is reasonable or valid. Though there is the difficulty of calculating it - especially if you want to consider that equity positions have changed over time - Scenario 2 just calculates equity at one point. I remember my solicitor putting to me that Deeds of Trust should be simple and extremely clear in their calculations, else they may be difficult to ever enforce - you see where I'm going with this... if you're trying to email your 'Year on year percentage gross equity calculations' excel sheet to a judge - funny in principal, notsomuch in practice.

To ensure we're being reasonable - in a negative equity scenario, in line with the manner of Scenario 1, they'd both lose 50/50. In line with the manner of Scenario 2, Person A would lose a far greater amount. You can't have your cake and eat it, Person A couldn't suggest that any gains they should get the lions share of while any losses they should share evenly.

its actually
Scenario 3 (2 is also flawed as it fails boundary conditions**)
as a reminder

Person A puts in an initial contribution of £80k, Person B puts in an initital contribution of £10k. The house is valued at £200k and a mortgage of £110k is taken out.
After 1 year the couple decide to sell. The property has increased in value to £220k and the mortgage balance is now £100k, meaning £120k equity.

This works fairly for every combination of deposit, mortgage split, and rise/fall
assume mortgage £110k is split  50:50  (servicing debt is the same as cash)

A puts in £80k +  £55k = £135k  ==  £135/£200  = 67.5%
B puts in £10k +  £55k = £ 65k  == £65k/£200 = 32.5%

On split you get that % back and then take off your share of the mortgage from that.
A = £148.5k - £50k = £98,500
B = £ 71.5k - £50k = £21.5k

This is really simple to put into a deed of trust.

You change the A gets £80k back to A gets (80/200)  40% back  B gets (10/200) 5% back.

Then the mortgage from the remaining 55% and split that profit/loss 50:50
if not enough left they have to dip into their share or own pockets.

Worst case crashy's dream comes true and the mortgage == value == £100k
A  £40k -£22.5k = £17.5k due
B £ 5k - £22.5k = -£17.5k due

The end result is  B owes A £17.5k 


**Algorithms need to work for all values.

They sort of look OK to start with but you can pull most to pieces with simple examples.

lets look at one simple boundary case for scenario 2.

Couple buy a house with 100% interest only mortgage paying 50:50
Lets ignore that S2 does not work for equitable contributions of zer0 and use common sense,  they own the place 50:50 and owe 1/2 the mortgage(if they pay it 50:50)

Now A put down a £1 deposit using S2 they now get all the increases in value.


S1 is fine if agreed and understood it is in effect an interest free loan of 1/2 the difference between initial inputs as long as the mortgage is paid 50:50.

it may be easier to understand if structured as a separate debt I lend you £X and we own 50:50.


A concept many don't grasp is changing cash to a debt does not change the basic maths

cash == bank of mum and dad == mortgage.
Converting cash to mortgage debt does not change the underlying finance and how the asset should be split it just adds the cost of servicing the debt.

then you have the other factors of how to manage/split  maintenance/improvement and unequal debt repayment if wanted.

Exodi

getmore4less said:
lets look at one simple boundary case for scenario 2.

Couple buy a house with 100% interest only mortgage paying 50:50
Lets ignore that S2 does not work for equitable contributions of zer0 and use common sense,  they own the place 50:50 and owe 1/2 the mortgage(if they pay it 50:50)

Now A put down a £1 deposit using S2 they now get all the increases in value.

I think that's a very specific example.

I don't even think S3 is bad of an example, I would be interested if anyone has successfully implemented this in a DoT or proposed it to a solicitor. Both my previous DoT's were severly limited by what the solicitor was willing to do.

I don't know if it was because it was too complicated (even though it seemed simple), if they just wanted an easy copy-paste job or maybe I was asking the wrong questions.

I'll concede - I think I misjduged that you were out to screw the lower contributor - S3 seems to sit inbetween S1 and S2 (which are common, albeit potentially flawed arrangements) of split.

I like the concept !

getmore4less

Exodi said:

getmore4less said:
lets look at one simple boundary case for scenario 2.

Couple buy a house with 100% interest only mortgage paying 50:50
Lets ignore that S2 does not work for equitable contributions of zer0 and use common sense,  they own the place 50:50 and owe 1/2 the mortgage(if they pay it 50:50)

Now A put down a £1 deposit using S2 they now get all the increases in value.

I think that's a very specific example.

I don't even think S3 is bad of an example, I would be interested if anyone has successfully implemented this in a DoT or proposed it to a solicitor. Both my previous DoT's were severly limited by what the solicitor was willing to do.

I don't know if it was because it was too complicated (even though it seemed simple), if they just wanted an easy copy-paste job or maybe I was asking the wrong questions.

I'll concede - I think I misjduged that you were out to screw the lower contributor - S3 seems to sit inbetween S1 and S2 (which are common, albeit potentially flawed arrangements) of split.

I like the concept !

That's how you test algorithm use boundary cases to see if they make sense

The equitable based option of £x buys X% works.

As long as you don't make the mistake of not including the mortgage.

Ie some think and example like £90k £10k £100k mortgage the ownership is 90% 10% when it is really 70% 30% with the mortgage debt 50:50 paid out of the shares.


The big problem with S2 it does not account for the debt being serviced which is demonstrated by the example