Floating deed of trust Unequal share of

tanrahman

I am looking for a fair way to distribute the potential profit of selling a property we currently live in. We are looking to sell current property and buy another property, but there is a potential for us to make a profit on the current property which we want to sell.   

We bought a property for £200,000
Deposit £20,000
Mortgage of: £180,000
Estimated current valuation: £230,000
Mortgage leftover £171,135
Deposit paid by myself £20,000: Sister did not contribute to deposit 
Potential profit of £30,000

We pay 50/50 on the mortgage. If we do in fact get a seller willing to pay the £230,000 then we stand to make a profit of £30,000. What would be a equal split of the profit? 

From my calculation the contribution is as follows; 
Myself: £24,432 (85%)
Sister: £4,332 (15%)
TOTAL CONTRIBUTIONS: £28,864

If there is a profit of £30,000 then the split would be the following;
Myself: £25,500
Sister: £4,500

Is this a fair split or is there another way?

We were in the process of getting a declaration of trust with the net proceeds of sale split 
55% myself and my sister getting 45% however at this moment it doesn't look fair to me if the profit is shared like that. Would I be better of getting a floating deed of trust etc so that it reflects the moving% that we both pay? Not sure what the best way forward is

BarelySentientAI

There are many ways, most of which would seem fair to some and not to others.

Split based on total contributions like you have.

Take your deposit out and split the residual based on the mortgage split.

Split 50/50 because that's how you own the property.

Play rock-paper-scissors for each £20.

Keep the entire amount as deposit for the next property.

And for the next property, work this out beforehand.

MWT

Generally I would suggest that with positive equity, the split be based on your initial deposit buying 10% of the property outright, so your £20k is now worth £23k.

The mortgage paid for the other 90% and you paid that equally between you so you share the remainder of the  profit before selling costs equally between you as that reflects the portion of the house that paying down the mortgage has allowed you to buy back from the bank.

It would be reasonable to split the selling costs in proportion to those amounts, so you will pay the majority of the costs from your share as you had the larger share of the ownership.  

 

bigstevex

What was agreed prior to purchasing the property as to how you would split any profit (or loss) upon sale?

The declaration of trust is done before/during the purchase of a property usually hence my question.