Tenants in common query

KevSmith1986

Hi everyone. Me and my partner are buying our first house together and one of the forms with the solicitors are joint tenants or tenants in common.
It's a 210k house and I'm putting down 50k deposit and my partner zero. I recently received a large sum of money due to a life insurance pay out that my mother gifted me half of. 
I was thinking should I fill in tenants in common and put I own 73.8% and my partner 26.2?
As I'm basically buying 23. 8 percent of the house with my 50k deposit. Does this sound about right? I don't want her resenting me soon as I "own" more of the house haha. Thanks. 

RAS

The maths is dodgy.

£210-50K = £160 mortgage. 50+80K  (half mortgage) = 130K. 130/210K= 61.9%

Another option is that you get a deed of trust, which could specify what happens if you split, that you get back £50K deposit when the house is sold and then split the equity 50/50, assuming that you are both paying equal amounts towards the mortgage. Of course if you marry or have a child......

Slithery

Where did you pull those numbers from?

You will be putting in £130k and your partner will be putting in £80k. I make that a 61.9 / 38.1 split. This is only one option though, there are plenty of other ways that the ownership can be split eg a deed of trust giving you back £50k and then the rest of the profit being split 50/50.

The correct time to decide on how you would be splitting the ownership was before deciding to buy a property.

KevSmith1986

Yeah it seems my maths sucks then. The solicitors gave 3 options. Joint tenants. Tenants in common. Then tenants in common with percentage of shares. I may go down the deed of trust Road then yes as the mortgage will be 50/50

RAS

And, please get your wills written, both of you. Who do you want to get your portion of the house if you are involved in a fatal crash?

If it's not your partner, are you prepared to let them live there until the end of the current fix? Perhaps with an adjustment if they have to pay the full mortgage.

Alternatively, at least insure each other's lives either on a fixed term or reducing term.

KevSmith1986

Yes we will be sorting wills 👍 We have an 8 month old boy. We both have life insurances in place atm. 

Exodi

KevSmith1986 said:

I don't want her resenting me soon as I "own" more of the house haha.

I think she'd resent you if she saw your numbers, how did you get to 73.8% !

I'd recommend a tenants in commons arrangement (that much is obvious) with a deed of trust - this allows you to expand on various things (e.g. mortgage contributions, renovation, etc) - it can also be updated as your circumstances change. I've had a couple over the years and they usually cost a couple of hundred pound.

E.g. if you owned as tenants in common without a DoT (e.g. fixed at 61.9 / 38.1) and your partner, for example, quit their job and decided to stay long term unemployed - you would be faced with either paying all the bills (but gaining no additional equity) or not paying the bills (and having the house repossesed). Extreme example, but you get the point.

saajan_12

KevSmith1986 said:

Hi everyone. Me and my partner are buying our first house together and one of the forms with the solicitors are joint tenants or tenants in common.
It's a 210k house and I'm putting down 50k deposit and my partner zero. I recently received a large sum of money due to a life insurance pay out that my mother gifted me half of. 
I was thinking should I fill in tenants in common and put I own 73.8% and my partner 26.2?
As I'm basically buying 23. 8 percent of the house with my 50k deposit. Does this sound about right? I don't want her resenting me soon as I "own" more of the house haha. Thanks. 

There's many ways of arranging this, depends on what you both want. The above (with correct maths) is my preferred solution, so that your 50k grows (or shrinks) with property price changes. If you sell before the mortgage is paid off, then you each get 61.9% / 38.1% of the sale price and then pay off half the mortgage each out of that. 


Note if the value fell more than the equity built, then partner's share could become negative with this method, so you'd have to chase them to pay you back separately. eg if you want to sell in a year, value fallen 10k (ie 200k) but only built up 5k equity (ie 155k mortgage). Your 61.9% / 38.1% shares would be 123.8k / 76.2k each, from which you each have to pay half the mortgage, ie 77.5k. So partner's net equity is actually -1.3k. The lender would take their 155k upon completion, regardless of your respective shares, so partner would just get nothing from the sale and owe you 1.3k separately.