floating deed of trust formula help

rosemorton95

Hi all,

I have searched the thread but remain confused. I am buying a house with a partner who's parents require us to have a deed of trust due to extremely large gift deposit from them. I understand their wish to protect their money if we split, which is beyond their control and so no opinion needed on this.

We are splitting mortgage 50:50 but there will be unequal deposits (35k:15k). We wanted a fixed deed which would mean return of deposits then any profit to be split 50:50 as we though that the fairest way as although one person is  investing more the other persons wage allowed more mortgage to be borrowed and earns more and pays for more things.

However a fixed deed will not do because we are fully gutting and renovating the property at the cost of around 70k which will come from the partner. 
Solicitor recommended a floating deed. This seems more of a complicated business arrangement with shares. Can anyone tell me if this usually works better in the favour of the person investing more/less. I have tried to calculate it with hypothetical numbers which essentially just gave me huge random numbers so it doesn't seem right but seem to come out like one person owning 33% and another 67%. 

I would just like an opinion on the fairness from someone who actually understands these.

 The formula is: individual payments/(purchase price +improvements) x sale price = lump sum

Loans/ (purchase price + improvements) x sale price= gross share

Many thanks if anyone can shed light.

getmore4less

If the project is going to be at the beginning just add the renovation costs to the starting costs as just a bigger deposit.

You are in effect buying for £X+£70k


If the other person has bigger income why not split the mortgage to get a better balance.

Get your deposit back has flaws over equity splits  but can work.

It's the equivalent of the bigger deposit lending the small deposit 1/2 the difference.

Could set it up like that.

45:15 assume the 70 is added to the 45.

That's a total of 100k more.

Set up a loan of £50k to smaller deposit then they are £65 each(with a loan on the side

Easy if you split you get 50:50 after the mortgage and then repay the loan from the share.

Or  let's say the mortgage is £300k

Total cost is 45+15+70+300=430 or 215 each.
215=45+70+100
215=15+200

Split the mortgage 100:200.

When sold you get 50:50 of  full sale and then pay off your share of the mortgage

In effect you both borrow 100k from the bank

The second 100k they get as a gift from the parent you borrow from the bank

As the higher income you can overpay your share faster.