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Declaration of Trust- Unequal Shares inc. Reno works

Hi everybody,


First time posting on a forum for me, hope that goes well.



  • My partner and I are contemplating buying our first house (£735k offer accepted). Loan would be £480k, remainder cash funded. The house needs renovating- builders estimates coming in at about £80k. Similar houses in the area today go for about £825k.
  • Funding splits would be as follows:
    • Myself:
      • Initial contribution = £233k split into £204k deposit and the rest SDLT and fees
      • Improvements = £80k (my partner doesn’t have savings to contribute to this)
      • Loan payments = 50% (including 50% of any ERC)
      • Any sale costs when we sell (est. £15k)= 50%
    •  My partner:
      • Initial contribution = £57k split into £50k deposit and the rest SDLT and fees
      • Improvements = £0k (my partner doesn’t have savings to contribute to this)
      • Loan payments = 50% (including 50% of any ERC)
      • Any sale costs when we sell (est. £15k)= 50%
  • We are not married hence thought we’ll need a DOT in place
  • Having tried a scenario where we sell at year 5:
    • Sale in Oct 2028
    • Sale price: est. £925k (assuming 2.5% inflation uplift from £825k price today for same house renovated)
    • Mortgage balance: £424k


  • We have seen the wording below being used:

The First Owner's percentage share shall be calculated by dividing the total of:

(a)         the First Owner's Initial Contribution; and

(b)         all sums paid by the First Owner in respect of the Expenditure,

by the Total Expenditure and then multiplying the result by 100.



·       Initial Contribution means:  amounts paid by each Owner towards the Cost of Purchase

·       Cost of Purchase means: deposit, SDLT, surveyor and legal fees  

·       Expenditure means: sums paid by the Owners in respect of any of the following:

o    Mortgage Payments;

o    any endowment policy taken out in connection with a mortgage secured on the Property;

o    any Improvements (works above £500); and

o    incidental costs incurred in the sale of the Property (if applicable) relating to estate agent's fees, legal fees and disbursements.

·       Total Expenditure means: total of

o    the First Owner's Initial Contribution;

o    the Second Owner's Initial Contribution; and

o    all sums paid by the First and Second Owner in respect of the Expenditure



  1. we’re unclear what this share should be applied on. Should it be the Sale price (£925k) minus mortgage balance (£424k) minus sale costs (£15k) minus any ERC? Or exclude the mortgage and ERC?
  2. This seems to leave my partner with a positive profit whilst mine stays negative (if we consider Net Equity to be net of sale costs and mortgage and ERC.
  • We have also tried a method whereby we:
    • calculate our shares per the drafting above
    • apply it to the net equity taken as Sale price (£925k) minus sale costs (£15k) minus any ERC- this gives us our share of net equity
    • Then subtract 50% of the mortgage balance to each of our share of net equity
    • But this leaves my partner with a negative net share whilst I make a profit


In short: we cannot seem to work out our maths to evaluate our shares and net profit such that both our contributions are fairly represented and we share risk fairly if we don’t make a profit on sale  ><’


Please help 😊


  • CSI_Yorkshire
    CSI_Yorkshire Forumite Posts: 1,792
    1,000 Posts Photogenic Name Dropper
    edited 15 August at 3:13PM
    If you're splitting mortgage payments 50/50 that makes the calculation easier.  Mortgage balance reduced by £56k in your example.

    Your total equity contribution is £233k (capital injection at start) + £80k (capital injection for improvements) + £28k (share of mortgage balance reduction) = £341k
    Partners is £57k + £0k + £28k = £85k

    Your share is 341 / (341 + 85) = almost spot on 80%.

    When sold, whatever cash remains after paying off the mortgage and all selling fees splits 80/20 in your favour.

    Repeat with whatever actual mortgage balance reduction is true at the point you want to compare.

    For your 925k sale, that would be £910k - £424k =  £486k  (returning £388k from your £341k and £97.2k from your partner's £85k)
  • ellis2023
    ellis2023 Forumite Posts: 2
    First Post
    Thank you v. much for the quick turnaroud CSI_Yorkshire.

    Apologies but I have a few follow-up questions:

    1) Why would each party's share of the mortgage payments be reflected as an equity contribution in the calculation? (ie. the 28k). 
    2) Does this method only work if we split 50/50? How would this method change if down the line we have to reevaluate and end up splitting the mortgage 60:40- would we have to ?
    3) Why are the proceeds of sale calculated by applying the percentage calculated to the proceeds minus mortgage and not to the entire proceeds?

    My thinking is:
    • Our joint loan is no different to cash when it comes to sizing our equity: ie. I bring £233k+£80k+£240k and my partner brings £57k+£240k. This means we own 65% and 35% respectively as that is what our cash (inc. cash borrowed) has acquired. It is irrelevant how much my partner repays as long as I don't have to repay any of her £240k share of cash?
    • Hence if we sold for £910k (£925k minus sales cost of £15k), would it not make sense to assume I receive £910k*65% and my partner £910k*35%. Ie. my share on the entire proceeds rather than subtract the debt first.
    • Of which we would each subtract the remaining debt balance * our share of mortgage at closing (£424k*50%= £212k each). 
    • Meaning my net proceeds would be £380k and my partner's £107k.
    I think the order in which things are netted out may be confusing me- it is simpler on 50/50 mortgage repayments but the logic stops making sense to me if I start assuming different ratios.

  • CSI_Yorkshire
    CSI_Yorkshire Forumite Posts: 1,792
    1,000 Posts Photogenic Name Dropper
    1.  Because that's how much of the residual asset value your contribution to the mortgage has 'bought' - it's the simplest way to ignore mortgage interest in the calculation.  Many people calculate based on the monthly contributions, but some of that is 'lost' and doesn't contribute to equity.

    2.  It's slightly more complex on different ratios, or with changing ratios, but the principle is the same.  If there is a consistently different ratio, then split the total balance change (the £56k in your hypothetical) by the appropriate ratio.  For a changing ratio, you could either apply it to each monthly equity change or you could aggregate the ratios over time to get the effective total ratio to apply.

    3.  Because my calculation is splitting the equity, so that's all I apply it to.

    I don't put the £240k in at the start because you don't own that yet, it isn't equity.  It's not an asset that you have contributed.  In your method, the percentage ownership of the property is not changing over time, it's entirely static at 65/35 forever.  That's possibly why you are having problems of one party with net profit and one without.

    On the day of purchase, you have committed £313k of your existing assets on the purchase.  Your partner has committed £57k.  This is an 84.6/15.4 split in financial commitment from existing resources.  If you then immediately sold for the same price, your static 65/35 split would mean that you recover £240.5k and they would recover £129.5k.  This would clearly be a little odd.

    On the day that the mortgage is paid off, your maths matches mine and the split is 65/35.

    The method that I propose gradually changes the asset split from 84.6/15.4 through to 65/35 as the 50/50 contributions to the mortgage balance begin to outweigh the large differential in initial contributions.

    Mine isn't the only way that works, and mathematically probably isn't precisely ''fair' given how I treat mortgage interest through time (by basically ignoring it), so feel free to choose any other that suits your circumstances.
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