Unequal deposits and equity percentages!

flambo33

Good evening, I’ll try to keep it brief and simple.

I moved into my partners 300k house a few years ago, she has 100k in equity but we’ve decided to go onto the mortgage together now rather than moving. I can’t afford to match the money she has in the property so we have agreed amongst ourselves that the best way would be a percentage split 33% for her 100k, we’d split the mortgage 50/50 meaning our splits would be 66.66/33.33% in her favour. That part I still believe is fair and protects her current investment. 

My issue going forward is that we would also like to build an extension for 50k, we would be splitting this additional debt 50/50 however if the house value then  increased by the 50k then 66.66% of that is hers even thought the debt is 50/50, what are the ways around this?

we will be seeking professional advice but I’d like to get my head around things. Of course we are not planning to break up but few do plan that, for personal reasons we need to protect ourselves without being overly petty. Would love to hear people’s thoughts and what the common practices are in situations like this! 

Thanks in advance! 

ArbitraryRandom

Equally, why should you get a 33% share before paying off the mortgage and actually contributing 33% to the equity?

When you contribute your 25k to the extension you will have paid 7.14% (assuming you are correct the property value will increase to £350)

This is just the way I would look at it - You can't just sell/value the extension. The value will be based on the property including the extension and the local housing market, and it's unlikely your investment will return exactly what it cost. 

I think there's two main ways to 'protect' what each partner has paid in.  

Shares are calculated based on an independent property value (minus any selling costs/remaining mortgage) vs % contributions made at the time of the split

Alternatively, you could say that your partner gets their £100k back (adjusted for inflation) and the remaining equity is split 50/50 regardless of future contributions (which would allow for if you need to adjust the split of contributions at some point in the relationship)

Either way, my recommendation would be to agree a method/intent now for if something happens down the line, there's no need to pin down exact shares. 

saajan_12

flambo33 said:

Good evening, I’ll try to keep it brief and simple.

I moved into my partners 300k house a few years ago, - do you pay anything towards mortgage / rent / bills in the house? You may both have agreed something, but arguably something something partner has been subsidising. 
she has 100k in equity but we’ve decided to go onto the mortgage together now rather than moving. I can’t afford to match the money she has in the property so we have agreed amongst ourselves that the best way would be a percentage split 33% for her 100k, we’d split the mortgage 50/50 meaning our splits would be 66.66/33.33% in her favour. That part I still believe is fair and protects her current investment. - makes sense assuming you mean 66/33 split of the house value (not the equity). If you sell / split before the mortgage is paid off, then you'd be responsible for 50% of the mortgage balance out of your 33% share of the house value. 

My issue going forward is that we would also like to build an extension for 50k, we would be splitting this additional debt 50/50 however if the house value then  increased by the 50k then 66.66% of that is hers even thought the debt is 50/50, what are the ways around this? - you could either split the extension cost in line with the 66/33 shares. Or following the extension, change the deed to a split of eg
You: 100k mortgage + 25k extn => 125k / 350k = 35.7%
Partner: 100k mortgage 100k equity + 25k extn => 225k / 350k = 64.3%

we will be seeking professional advice but I’d like to get my head around things. Of course we are not planning to break up but few do plan that, for personal reasons we need to protect ourselves without being overly petty. Would love to hear people’s thoughts and what the common practices are in situations like this! 

Thanks in advance! 

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