tenants in common - percentage ownership confusion - please help!

willco999

Im so confused wonder if anyone can help me.

 

I am Buying a house with my partner for £920k

Im putting in considerably more money than my partner and just want to be sure that we get the declaration of trust right and that everything is fair.

 

We are splitting the £290k mortgage 50/50.

I am putting in £590k cash and he’s putting in £40k (630k total cash)

 

Do I need to add the mortgage to the split as if it were cash?

Ie 590 + (50% of 290)  145 = 735

40+ 145 = 185

 

And then the percentages are pretty much 80:20?

 

If this is correct, my confusion comes with what happens when we sell the house – if we sold the house tomorrow for a million does this mean my partner is entitled to 200k – or 20% of the balance after the mortgage has been paid back?

That’s £145k which doesn’t make any sense to me if he’s only putting 40k cash in? I’m so confused please help!

RAS

To a large extent, you can put in what you want as long as you both agree to the plan and the wording.

I'd have thought 

Your deposit as % of house purchase
Partner's deposit as % of house purchase

To be paid back as  %s of the net house sale and any remainder split equally, assuming you are paying the mortgage equally.

And do make wills and talk about life insurance.

willco999

ok thank you so much for the reply - so that would mean 

590vs40 (630 total) is 93.7 % / 6.3 % of the deposit of house purchase

say we stay in the house for ages and pay the mortgage off - would this still be fair to my partner if hes spent 145k on the mortgage but still only owns 6.3%? i guess 6.3% of a hopefully bigger pot?

sorry if the above is unclear! thanks for your help:-) will def get a will and talk about life insurance

Exodi

As RAS says, the deed of trust will say what you want it to say.

But in my opinion, your method of establishing equity is the fairest.

But your maths is flawed, the amount due in your scenario is 20% before the mortgage is paid back.

To run through your example:

You bring to the table £590k + £145k = £735k
Your partner brings to the table £40k + £145k = £185k

(Which as you correctly say is around 80:20.)

If you sell the house the next day for £1m:

You would receive 80% (£800k), then after paying off your share of the mortgage (£145k) be left with £655k.
Your partner would receive 20% (£200k), then after paying off their share of the mortgage (£145k) be left with £55k.

You gained £65k, your partner gained £15k.

Exodi

willco999 said:

ok thank you so much for the reply - so that would mean 

590vs40 (630 total) is 93.7 % / 6.3 % of the deposit of house purchase

say we stay in the house for ages and pay the mortgage off - would this still be fair to my partner if hes spent 145k on the mortgage but still only owns 6.3%? i guess 6.3% of a hopefully bigger pot?

sorry if the above is unclear! thanks for your help:-) will def get a will and talk about life insurance

You've misunderstood RAS.

His method is declare your intital deposits as % of house value -

e.g. 590/920 = 64%ish and 40/920 = 4%ish.

So you agree to give back 64% and 4% of whatever the house sells for in the future, then split whatever is left (assuming you equally contribute to mortgage, renovation, etc going forward).

I'm personally not a fan of this method (I prefer the method in your first post) but it's up to whatever people feel is fair.

gwynlas

Whilst you know how mich you are nitially contributing as deposit it would seem fair to ringfence this in a deed of trust. Going forward contibuting 50/50 on the mortgage and adding this in to deed of trust does not account for life events such as one of you becoming ill and being unable to make a contribution to the mortgage thus the repayment falling on the other. If I was making the repayment despite having smaller deposit i would expect an equal split of sale price minus ringfenced deposit.

Madeinireland101

I don’t know a lot about this but I believe you can create a floating deed of trust whereby the % ownership is continually changing depending on individual contributions like paying the mortgage and maybe making extra capital payments etc. I believe it sounds like the best and fair way of doing it in terms of keeping the position up to date. So when you come to sell the house the % ownership is determined at that point based on contributions at that time - but I may have got the wrong end of the stick.

Exodi

Madeinireland101 said:

I don’t know a lot about this but I believe you can create a floating deed of trust whereby the % ownership is continually changing depending on individual contributions like paying the mortgage and maybe making extra capital payments etc. I believe it sounds like the best and fair way of doing it in terms of keeping the position up to date. So when you come to sell the house the % ownership is determined at that point based on contributions at that time - but I may have got the wrong end of the stick.

I think you're probably misunderstanding - in both examples in this thread, the % ownership would continually change

In example one:

At the start
Person 1: £590k + (£145k mortgage -£145k outstanding) = £590k (93.65%)
Person 2: £40k + (£145k mortgage -£145k outstanding) = £40k (6.35%)

When the mortgage is paid down by 90k (for example, assuming no house price incresae)
Person 1: £590k + (£145k mortgage - £100k outsanding)  = £635k (88.19%)
Person 2: £40k + (£145k mortgage - £100k outstanding) = £85k (11.81%)

Madeinireland101

Exodi said:

Madeinireland101 said:

I don’t know a lot about this but I believe you can create a floating deed of trust whereby the % ownership is continually changing depending on individual contributions like paying the mortgage and maybe making extra capital payments etc. I believe it sounds like the best and fair way of doing it in terms of keeping the position up to date. So when you come to sell the house the % ownership is determined at that point based on contributions at that time - but I may have got the wrong end of the stick.

I think you're probably misunderstanding - in both examples in this thread, the % ownership would continually change

In example one:

At the start
Person 1: £590k + (£145k mortgage -£145k outstanding) = £590k (93.65%)
Person 2: £40k + (£145k mortgage -£145k outstanding) = £40k (6.35%)

When the mortgage is paid down by 90k (for example, assuming no house price incresae)
Person 1: £590k + (£145k mortgage - £100k outsanding)  = £635k (88.19%)
Person 2: £40k + (£145k mortgage - £100k outstanding) = £85k (11.81%)

Yes and that’s why a floating deed of trust would be best as it would reflect any changes up till the point of sale

Exodi

Madeinireland101 said:

Yes and that’s why a floating deed of trust would be best as it would reflect any changes up till the point of sale

I won't repeat myself, we're talking about the same thing...