How to protect unequal contributions when remortgaging and borrowing extra?

moliver_93

Hi all,

Hoping someone can offer some guidance because I’m trying to make sure things are fair for both of us before we remortgage.

My partner and I bought our house in July 2023 for £490,000. I didn’t contribute towards the deposit, but I covered the buying fees and I’ve been paying the mortgage on my own for the last 2.5 years and plan to continue doing so. We have our mortgage with Generation Home, who track our contributions and equity separately.

For reference, the purchase was made up of:

• £150,000 mortgage (effectively my part)
• £340,000 cash deposit, which came from my partner

So partners equity in the property is much larger than mine, and that’s always been clear between us.

Our fixed term ends in July 2026, and we’re planning to remortgage because Generation Home’s rates are pretty high (we are currently on 5.23%). When we switch, I’d like to borrow an extra £50,000 to go towards an extension. Partner already has savings for the project, but I don’t, so the extra borrowing would effectively be “my” contribution.

I’ve checked current rates and borrowing the extra £50k would only push the monthly payment up by about £90 a month, which I can comfortably manage with my income. 

The challenge is:

I want something in writing that says the extra £50k is my responsibility and not partners, even though the mortgage itself will be in both our names. We’d also want to make sure partners original £340k deposit stays protected, and that the equity reflects what each of us has actually put in.

Has anyone been through something similar?

Is a Deed of Trust the right way to handle this when remortgaging?

And does it fully protect unequal deposits and extra borrowing between partners?

Any advice or experiences would be much appreciated!

saajan_12

moliver_93 said:

For reference, the purchase was made up of:

• £150,000 mortgage (effectively my part)
• £340,000 cash deposit, which came from my partner

When we switch, I’d like to borrow an extra £50,000 to go towards an extension. Partner already has savings for the project, but I don’t, so the extra borrowing would effectively be “my” contribution.

Are you looking to keep your respective shares of any gains too, or just the original £ contributions? Eg on the original, I would have treated it as 
You: 150k / 490k = 30.6%
Partner: 340k / 490k = 69.4%

Has the value increased at all? If not, then post extension the total contribution now becomes 590k (incl 100k for the extension between you) so the 
You: 200k / 590k = 33.9%
Partner: 390k / 590k = 66.1%

I'd get the deed of trust to reflect that, and check that you're already down as tenants in common. 

In terms of hte mortgage, it seems clean already since the mortgage is fully paid by you and would come out of your share upon sale, so no change there. Not as far as the lender is concerned, but just the mutual agreement between you both. 

moliver_93

saajan_12 said:

moliver_93 said:

For reference, the purchase was made up of:

• £150,000 mortgage (effectively my part)
• £340,000 cash deposit, which came from my partner

When we switch, I’d like to borrow an extra £50,000 to go towards an extension. Partner already has savings for the project, but I don’t, so the extra borrowing would effectively be “my” contribution.

Are you looking to keep your respective shares of any gains too, or just the original £ contributions? Eg on the original, I would have treated it as 
You: 150k / 490k = 30.6%
Partner: 340k / 490k = 69.4%

Has the value increased at all? If not, then post extension the total contribution now becomes 590k (incl 100k for the extension between you) so the 
You: 200k / 590k = 33.9%
Partner: 390k / 590k = 66.1%

I'd get the deed of trust to reflect that, and check that you're already down as tenants in common. 

In terms of hte mortgage, it seems clean already since the mortgage is fully paid by you and would come out of your share upon sale, so no change there. Not as far as the lender is concerned, but just the mutual agreement between you both. 

Thanks so much for your help, that’s really useful.

To answer your questions:

• The house is now worth around £530k based on Zoopla estimate. We’ve done a few improvements already including new windows, a renovated bedroom and a new garage roof, so that seems to have added some value. These improvements have been paid for equally. 
• Yes, I’d like to keep our respective shares of any gains, not just the original cash contributions.

I think a Deed of Trust reflecting the updated contributions and percentages is probably what we need, especially when we remortgage away from Generation Home.

Thanks again for taking the time to reply, it’s helped clarify things a lot!

silvercar

To start with, I would adjust this:

You: 150k / 490k = 30.6%
Partner: 340k / 490k = 69.4%

to take account of the costs you paid at the start. If they were say £3k. Then you have 
Y: 153/493=31%
P: 340/493=69%

The property has increased to 530k. You need to agree how much is due to the improvements you have made and how much is due to house price inflation in your area. The problem is that Zoopla won't know of your home improvements, so won't have factored that in at all. So the Zoopla valuation assumes all the improvements are general things that people do to update their homes over time. If you have both paid this equally, you now have a slight imbalance because the cost of the works was equal, yet you only own 31% of the property. So you need to agree how to account for this.

Y: 153 + 50% of 37 = 171.5/530=32.4%
P: 340 + 50% of 37 = 358.5/530=67.6%

If you agree to ignore the costs of the improvements you have made, then you keep the 31%/ 69% split, as you both have had growth on your individual shares. Though this doesn't seem right, if you have paid more to arrive at that growth as a percentage of your share.

silvercar

Another thing to ponder. Do you meet all the arrangement fees, legal work, valuations of moving the mortgage, given it is only you that needs the mortgage? Or is it part and parcel of the costs of having a home together?

saajan_12

silvercar said:

To start with, I would adjust this:

You: 150k / 490k = 30.6%
Partner: 340k / 490k = 69.4%

to take account of the costs you paid at the start. If they were say £3k. Then you have 
Y: 153/493=31%
P: 340/493=69%

Agree with this, I was keeping it simple but really it doesn't matter whether the money went towards deposit or buying costs, its all required to purchase at the end of the day so I'd include the costs. 

moliver_93 said:

saajan_12 said:

moliver_93 said:

For reference, the purchase was made up of:

• £150,000 mortgage (effectively my part)
• £340,000 cash deposit, which came from my partner

When we switch, I’d like to borrow an extra £50,000 to go towards an extension. Partner already has savings for the project, but I don’t, so the extra borrowing would effectively be “my” contribution.

Are you looking to keep your respective shares of any gains too, or just the original £ contributions? Eg on the original, I would have treated it as 
You: 150k / 490k = 30.6%
Partner: 340k / 490k = 69.4%

Has the value increased at all? If not, then post extension the total contribution now becomes 590k (incl 100k for the extension between you) so the 
You: 200k / 590k = 33.9%
Partner: 390k / 590k = 66.1%

I'd get the deed of trust to reflect that, and check that you're already down as tenants in common. 

In terms of hte mortgage, it seems clean already since the mortgage is fully paid by you and would come out of your share upon sale, so no change there. Not as far as the lender is concerned, but just the mutual agreement between you both. 

Thanks so much for your help, that’s really useful.

To answer your questions:

• The house is now worth around £530k based on Zoopla estimate. We’ve done a few improvements already including new windows, a renovated bedroom and a new garage roof, so that seems to have added some value. These improvements have been paid for equally. 

Well Zoopla is going to be very rough, and has no idea about the improvements made. However if remortgaging, you may get a new valuation which is a little more reliable. 

The above items mostly seem like maintenance, but for larger capital increasing works in future, it may be easier ot contribute in the %s based on your ownership. Splitting it 50/50 will mean you have to update the ownership % each time. 

poseidon1

Quite a serious oversight on both your parts, not having a detailed declaration of trust setting out your respective shares of the purchase price from outset, despite the sound advice you were given in your 2023 post below-

https://forums.moneysavingexpert.com/discussion/6436026/buying-a-house-with-partner#latest

My impression is you are unmarried so frankly in the event of an acrimonious split with your partner,  and in the absence of agreement to the contrary,  a convincing argument could be made that only the annual amounts of capital repaid on the repayment mortgage constitute the extent of your accrued equity in the property with the mortgage interest element paid in lieu of rent, especially if he is perfectly capable of taking over the mortgage himself.

Your borrowing a further £50k for work that may or may not increase the property value and therefore your respectives shares of equity, would seem to me to compound your  error in not having an original declaration of trust which established your position from outset.

Once you embark on the trust declaration excercise on a retrospective basis, you could be in for a rude awaking by virtue of a dispassionate  professional assessment of the value of your contribution  and the equity arising therefrom.

Emmia

Who's name is on the title and mortgage?

moliver_93

Emmia said:

Whose name is on the title and mortgage?

Both of ours are