Splitting Mortgage Payments Fairly

Home_Harmony96

Hi All, 

My partner (M,27) and I (F,27) are in the process of saving for a house. 

We are keen to know what works for others/ others opinions when it comes to splitting mortgage payments/household bills, along with any pros and cons of each.  

Currently, we are both working full time, Mr earns more and is likely to keep increasing. Not married & No children, although this is in future plans, which may open another can of worms but that’s for a later discussion lol!

Two options being considered- 

Option 1- 

50/50- of mortgage payments and all household bills. 

Option 2- 

Split everything by percentage of earnings. Using the calculation attached, at the moment, I would pay 45% and he 55%. This would be reevaluated when pay rises occur. 

Side thought: IF, worst case scenario, we split- how would this then be divided in a sale. 

Thank you for any input you can give! ☺️

(this has also been posted under the mortgage section) 

Kynthia

Taking on a 30 year debt with an unmarried partner is very risky. Personally I'd wait until marriage or have one buy on their own. However I know with the cost of houses and high rents that isn't always possible, but make sure you discuss what happens if you split. Are you buying somewhere one of you can afford to buy out the other, will you need to sell, what happens if the property hasn't gained any equity and you've got a mortgage with a large redemption fee for many years (please get a reducing one). 

Get the house and mortgage seperate from bills. Bills are your living expense and should be equal unless you have very unequal income. The mortgage and deposit should be split according to how much of the property you'll each own as that's what it's paying for. Buying an asset is different from your monthly food and electricity usage.

So if your home costs £330k, however much each of your deposit and share of the mortgage pays for is your share of ownership. So if you put down £20k deposit and pay 40% of the mortgage whil your partner does £10k deposit and 60% of the mortgage, you are buying 42% of the house and should own that percentage (£20k plus 40% of £300k). Your partner would be buying 58% (£10k plus 6% of £300k).You should own as tenants in common and record the percentages you own with a trust deed.

However, if there is a big disparity in your deposit amount you could do it slightly differently to protect that larger amount. Perhaps record that you and he should each get your deposits back first and then own the house in the percentages you are splitting the mortgage. So if you paid all £30k mortgage but were paying 40% of the mortgage you'd own 40:60 but get the first £30k of any equity. However if you need to sell and there isn't £30k equity in the home you will have lost it.

Talk frankly with each other about the different scenarios. You split up early and the house has made a loss, how will you pay the redemption fee and selling costs? What if one of you loses your job and can't pay their share of the mortgage? What if one of you has to take on a lower paying job and wants to reduce their percentage of ownership and share of the mortgage payments? What if one wants to sell and the other wants to rent it out until the equity has recovered so the deposit isn't lost?

Jemma01

I personally don't understand the second option, if someone earns more than the other, that's because their job pays more and probably requires more skills (only them working on it, not a shared job with both of you). So in practice, no one is entitled to a free living, nor anyone paying a percentage towards their living. Before he came to your life, you were paying 100%, why would you now pay 45%?

If the higher earner wants something outside the budget of the lower earner, it is up to them what to do, but it shouldn't be an expectation (or fair) that the other gets free things just because they happened to be on a lower income.

northwalesd

Jemma01 said:

I personally don't understand the second option

However, there are plenty of posts on here where couples do exactly that. Some people support option 1, like you, but plenty support option 2.

onomatopoeia99

You both get equal benefit so should contribute equally.

You have the option of increasing your income by increasing your skills to level of his or higher, to find a better paying job, so you could become the higher earning partner.

Danien

Third option (the way Miss and Mr Danien have always done it)

All take home wages considered our joint pot of funds. All essential expenses, regular savings, pensions etc including mortgage/rent paid from the joint pot and any monies left over split between us. Any split of profits from house sale would be 50/50.

Husband was earning twice as much as me when we moved in together many moons ago and insisted on this system. I've always worked in caring/helping/advocacy roles as a vocation which do not pay as well and Husband didn't feel I should be worse off or he should keep his earnings separate because he earned more than me due to the type of work I'd chosen (what a sweetheart I know). Over the years there were times I earned more due to promotions, but we've always done it the same way.

Further piece of advice to everyone. Agree what will happen if you split with money, property, children etc. while you still love each other. Get it down on paper and agree that regardless of how bad you feel at the split you will follow it (barring extenuating circumstances like domestic violence which you also agree to). Did that with ex husband and though I was really angry when we split, we both were fair and followed through on what had been agreed at the beginning.