Joint ownership - how to apportion

vasseur

I'm  buying a property with my partner of 2 years. At present he rents and I am selling my house. We earn roughly the same. We have had an offer accepted on a house for £435k and will have approximately £260k deposit from the sale of my house. We've had a mortgage approved for £200k. Once we move in we will be splitting the bills equally between us. How would we work out a fair percentage of the house for each of us (the conveyancer is asking) should we split up?

For context, this was my partner's idea as he knows that I am putting more into the new property than him but as he will be contributing once we move in it's only fair that should our relationship finish he doesn't end up with nothing.  For my part I have always bought properties on my own so the deposit comes from everything I have built up over the years so splitting it 50:50 doesn't seem right either!  Neither of us would be able to afford this house if it wasn't for the other.

Is there a formula I can use to work it out? My brain is mushed from thinking about it!!

Just like to add that we don't have any intentions of splitting up just want to cover ourselves.

kimwp

Why will he be putting in more once you move in?

My view would be that you would own the percentage of the house that equates to your deposit divided by house price, then split any accrued equity equally (depending on the answer to the above). Reason - if you split, you walk away with what you brought, plus half of what you built together.

david29dpo

As above. Just remember to draw up a deed of trust for the percent-ice spit, you cant do it at the land registry. 

Bigphil1474

We did this on our house. My OH put their proceeds of sale in and the remaining cost was split between cash each, and the mortgage which I will pay entirely as they are retired. Works out 65% to them and 35% to me should the mortgage be paid off. 

You basically have bought 260/435ths of the house yourself, and any equity from the remaining 175/435ths should be shared equally if you are paying equal shares of the costs going forward. Take into account the costs of moving/stamp duty as well though - who is paying that, but presumably that's why your proceeds of sale + mortgage are more than purchase price?. 

Rough split would be in the region of 58% yours, then 50/50 on the remaining equity up to 21% each.

RAS

You need to build in rules for appreciation and depreciation. 

Your current property could be worth £50k more or £50k less in 3 years time, so you can't expect to get your deposit plus half the (additional) equity.

On the other hand BF needs to understand that the bulk the mortgage he's paying towards will initially fund interest rather than capital, so he's not going to get back half of the mortgage payments if you split. Not just know but explicitly understand.

So you get back the percentage of the purchase price represented by your deposit, and you share any increased equity in proportion to your mortgage contributions.

Given you've got access to £460k potentially I'd suggest you also discuss whether to max the deposit or use the full mortgage. And whether if you max the mortgage your spare £25k goes to improvements and how to deal with that, or you are free to use as pension contributions etc?

vasseur

Thanks all, you've given me plenty to think about.

saajan_12

Personally I'd base it on the relative amounts you each contributed either in cash or in mortgage, as that way you each get a share of any appreciation (or depreciation). However its a personal decision, as some couples value other things eg feeling even in the venture. Here's my formula: 

Lets say your other conveyancing and stamp duty costs are 25k making a total 460k investment, though you can adjust this
You: 260k deposit + 100k half mortgage => 360k / 460k = 78%
Him: 100k half mortgage => 100k / 460k = 22%

Note that's the share of the sale price, NOT of the equity. So if there's still a mortgage balance when you sell or break up, then you'd each pay half the outstanding mortgage out of those shares above. Eg 
if value rises to 500k and mortgage is 175k at that point, then 
You: 78% x 500k = 391.3k less 50% x 175k = 87.5k => 304k
Him: 22% x 500k = 108.7k less 50% x 175k = 87.5k => 21.2k