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Tenants in common - Shared ownership

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Tenants in common - Shared ownership

edited 30 November -1 at 12:00AM in House Buying, Renting & Selling
3 replies 273 views
soontobehousebuyersoontobehousebuyer
1 posts
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edited 30 November -1 at 12:00AM in House Buying, Renting & Selling
Hi everyone - help needed!


I am looking at buying in the Shared Ownership scheme in London with a good friend.


We are looking at buying 40% of a property valued at £825,000.


I am the only one putting a deposit down of £45,000 - my friend is putting down nothing as he has no real savings (except for fees etc). That means we will need a mortgage of £285,000.



I want to make sure I am doing calculations correctly to agree on the Deed of Trust how much of the property I will own.


I've worked out I will own 56.82% and he will own 43.18% which sounds like he will own a lot of the property for not putting down any capital?


Is this correct or am I overthinking it? I want to work out potential profits as and when it does come to sell to see if it's financially viable.


E.g. if the property was to rise to £900,00 in future, I worked out I would be entitled to £204,552 and he would be entitled to £155,448 with the above %s.


Is there any other way the entitlement would be decided?


Any help will be appreciated!

Replies

  • MovingForwardsMovingForwards
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    On sale of the property, after sale costs, the first £45k to you, the remainder split 50/50, means you are guaranteed to get your £45k back, unless there is a massive crash.

    Do you have 50% of the fees to make it a little fairer?

    If so, you could do it so you both pay 50% of the fees and his remaining 50% not towards the fees can go as a small deposit contribution.

    E.g first £45k to you, £10k to mate, remainder at 50/50.
  • seradaneseradane
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    E.g. if the property was to rise to £900,00 in future, I worked out I would be entitled to £204,552 and he would be entitled to £155,448 with the above %s.

    Yes you can do it that way - but consider that once you take your initial 45k out of the scenario, despite contributing the same after that point, you are now entitled to £159,552 to his £155,448. Is everyone happy with that?

    Or, as MovingForwards says, just take the £45k out first then the rest is divided evenly.
  • Tom99Tom99
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    I am looking at buying in the Shared Ownership scheme in London with a good friend.
    We are looking at buying 40% of a property valued at £825,000.
    I am the only one putting a deposit down of £45,000 - my friend is putting down nothing as he has no real savings (except for fees etc). That means we will need a mortgage of £285,000.
    I want to make sure I am doing calculations correctly to agree on the Deed of Trust how much of the property I will own.
    I've worked out I will own 56.82% and he will own 43.18% which sounds like he will own a lot of the property for not putting down any capital?
    Is this correct or am I overthinking it? I want to work out potential profits as and when it does come to sell to see if it's financially viable.
    E.g. if the property was to rise to £900,00 in future, I worked out I would be entitled to £204,552 and he would be entitled to £155,448 with the above %s.
    Is there any other way the entitlement would be decided?
    Any help will be appreciated!
    You do not use a fixed percentage in the DOT you need a 2 part formula. You need to start with the all inclusive price including fees stamp duty etc.
    Assume for the moment that is £330,00 and you are the only one putting in capital of £45,000 your DOT would say that you get 13.6% (45/330) of the sale price less disposal costs, then after the mortgage is paid off you split whats left 50/50.
    That assumes you are splitting the mortgage payments 50/50. If there is rent to pay on the 60% you don't own it would be a good idea to put in the DOT that this will also be split 50/50.
    Using this formula if you sell on day 2 your partner will get nothing but if you sell in say 25yrs time when the mortgage has been paid off by both of you, you will get 56.8% of the sale proceeds and your friend 43.2%.
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