How to avoid contributing ALL the equity from the sale of my flat towards deposit for a joint home.

raven6323

Hello, 

This is a very speculative and hypothetical question, as I reckon I'm about three years out from selling my flat but I'd like some advice nonetheless!

I currently own a one bedroom flat which I bought in 2020. I was incredibly fortunate to be gifted a large deposit from my Mum (part of her inheritance when my Nan died). The mortgage is up for renewal next July and I plan to fix for another two before I think about selling and buying somewhere with my partner. 

My partner and I will have unequal deposits. I estimate I'll have about £150k (once the outstanding mortgage and fees are paid) and he, about £20k. We have already agreed that when we buy together, we will do so as tenants in common with unequal shares in order to protect my money, in addition to drafting a declaration of trust.

As we will have a joint income of approximately £60-70k at this point (and therefore be approved for a £250k-ish mortgage if we're working with a 4-4.5x multiplier) I don't see the need for me sink all my equity into the next mortgage deposit.

So how does it work? How do I only contribute a portion of the equity I have from the sale of my flat to the flat/house we buy together, if the buying and selling happens at the same time. 

Say we wanted to buy a two bedroom flat at £350k. We take out a £250k mortgage, he puts in 20k and I contribute 80k of my equity. Can I specify to a solicitor that upon completion, any excess above the £350k is returned to me? If we're working with the figure of 150k equity, this will be about 70k.

I hope that all make sense? I also want to know how I'd protect my initial gifted deposit if we married before moving, as I'm aware that the flat would become a marital asset but that's a question for another day!

anselld

Yes, just tell the Solicitor how to allocate the sale proceeds.

As you mention, marriage  changes things and at least in the longer term there would cease to be any protection for unequal shares regardless of whether they are in property or savings.

raven6323

anselld said:

Yes, just tell the Solicitor how to allocate the sale proceeds.

As you mention, marriage  changes things and at least in the longer term there would cease to be any protection for unequal shares regardless of whether they are in property or savings.

So if we were married before I sold, but I wanted to keep some of the equity back, I couldn't just ask for the sale proceeds to be sent to me, even though the flat was in my name? Likewise, if we got married, this would supersede any declaration of trust? 

If we had a prenup drafted beforehand specifying that the sale proceeds were mine (and that any equity kept in savings or used as a deposit on joint property should be considered a premarital asset in the event of separation) would that hold any weight?

Everyone always says it's safer to buy property once you're married, but I'm not so sure.

anselld

raven6323 said:

anselld said:

Yes, just tell the Solicitor how to allocate the sale proceeds.

As you mention, marriage  changes things and at least in the longer term there would cease to be any protection for unequal shares regardless of whether they are in property or savings.

So if we were married before I sold, but I wanted to keep some of the equity back, I couldn't just ask for the sale proceeds to be sent to me, even though the flat was in my name? 

Yes you can still instruct the Solicitor to pay sale proceeds to your own account.

Likewise, if we got married, this would supersede any declaration of trust? 

Eventually yes.  The longer you are married the more likely divorce settlement becomes 50:50.  It is down to Court to decide regardless of DoT although they will give it some consideration.

If we had a prenup drafted beforehand specifying that the sale proceeds were mine (and that any equity kept in savings or used as a deposit on joint property should be considered a premarital asset in the event of separation) would that hold any weight?

Prenup is an American concept.  No legal standing in UK law.

Everyone always says it's safer to buy property once you're married, but I'm not so sure.

Can't see that it makes any difference.  If you really want to stick strictly to "whats mine is mine" don't get married.

^^^^^^^^^^

raven6323

anselld said:

raven6323 said:

anselld said:

Yes, just tell the Solicitor how to allocate the sale proceeds.

As you mention, marriage  changes things and at least in the longer term there would cease to be any protection for unequal shares regardless of whether they are in property or savings.

So if we were married before I sold, but I wanted to keep some of the equity back, I couldn't just ask for the sale proceeds to be sent to me, even though the flat was in my name? 

Yes you can still instruct the Solicitor to pay sale proceeds to your own account.

Likewise, if we got married, this would supersede any declaration of trust? 

Eventually yes.  The longer you are married the more likely divorce settlement becomes 50:50.  It is down to Court to decide regardless of DoT although they will give it some consideration.

If we had a prenup drafted beforehand specifying that the sale proceeds were mine (and that any equity kept in savings or used as a deposit on joint property should be considered a premarital asset in the event of separation) would that hold any weight?

Prenup is an American concept.  No legal standing in UK law.

Everyone always says it's safer to buy property once you're married, but I'm not so sure.

Can't see that it makes any difference.  If you really want to stick strictly to "whats mine is mine" don't get married.

^^^^^^^^^^

The first answer is the most important, thank you! I just wanted to make sure that even once we're married, the equity from the sale of this flat could go back to me. There will eventually be considerable disparity in incomes between us; I work in a low paid public sector job and he's a barrister (sadly he doesn't know much about property law) so I just want to protect myself.