commensurate share deed

ro2778 · 9 March 2018 at 6:11PM

I can't really think about it in terms of apples, so I downloaded a mortgage schedule calculator spreadsheet to track the actual numbers of my mortgage - actually in my case mortgages because I'm porting one and borrowing more - and then I created a model that would allow me to change the percentage contribution of each owner on a monthly basis plus insert over payments and take account of deposits.

https://drive.google.com/open?id=1Tjjh1749UNhqlkKgqY5FcSblKVGZH4mD

Now I just have to figure out how to turn this into a formula for the deed. Assuming it's correct.

getmore4less · 9 March 2018 at 9:54PM

Until you grasp a simple model like the apples you should not move onto something more complicated.

if you really believe that the person that borrowed the money to get the apples owns more apples then I will leave you to it.

ro2778 · 9 March 2018 at 10:13PM

Oh well I guess I went straight to the mortgage, thanks anyway for nudging me along, this is my latest understanding

Formula to derive equity due on sale
1) Equity due = Sale price - (End balance for total mortgage remaining inc. early repayment charge + costs associated with sale inc., solicitors fees, estate agent fees, housework in response to buyers survey) * Proportion of Equity due to Owner 1/2
2) Proportion of equity due to Owner 1 or 2 = e.g., for Owner 1 = (Percentage of total equity for owner 1 / (percentage of total equity for owner 1 + percentage of total equity for owner 2)) * 100
3) Percentage of total equity for Owner 1/2 = Equity from deposit + Equity from Mortgage 1 + Equity from Mortgage 2 etc... + Equity from Mortgage x
4) Equity from deposit for Owners 1 & 2 = e.g., for Owner 1 = (Owner 1's Deposit / Purchase Price) * 100
5) Equity from mortgage x for Owner 1/2 = e.g., for Owner 1 = (End capital paid by Owner 1 / house purchase price)*100
6) End capital paid e.g., for Owner 1 = Cumulative capital paid during mortgage x i.e., Owner 1's contributions to repayments inc. overpayments - interest calculated each month then summed for duration of Mortgage x

And the element that makes it commensurate or floating is the fact that 6) End capital paid is calculated each month, therefore there is the flexibility for 2 owners to change their contributions each month, so long as between them they are keeping up their repayments of course!

steampowered · 9 March 2018 at 11:09PM

getmore4less wrote: »

Total wrong understanding of how equity and serving debt works

I don't know why you feel the need to be so rude to people. It is completely unnecessary. Why can't you address people with basic respect, even if you disagree with them?

You are also simply incorrect.

The courts in this country take mortgage payments into account as payments towards capital when determining the respective shares of co-owners. You may disagree with that approach but it is simply a fact under English law. A basic google of co-ownership law will tell you that.

Similarly the courts do not draw a distinction between payments going to mortgage principal and payments going to mortgage debt.

It is extremely common for co-owners to enter into deeds setting out how their respective shares are to be calculated. And extremely common and sensible for those shares to be based on mortgage payments.

steampowered · 9 March 2018 at 11:20PM

getmore4less wrote: »

if I buy 3 apples for £1 and you use a payday loan to buy another 3 apples for a £1 and have to pay back £2 we each own 3 apples.

if we pooled the money to buy 6 apples why do you now own 4 apples and I only own 2 apples?

A mortgage is very different to a personal loan.

If you pool your money to buy a property with the benefit of a mortgage, both co-owners are jointly liable for 100% the mortgage debt. It makes no sense to talk of "me" taking out the mortgage to buy the apples - the mortgage is both of our debt.

And both co-owners will lose their entire interest in the property if the mortgage is ever enforced.

That is why co-owners who contribute towards discharging a mortgage will, in the absence of agreement to the contrary, get an interest in the property. The law is crystal clear on that.

ro2778 · 9 March 2018 at 11:35PM

ro2778 wrote: »

Formula to derive equity due on sale
1) Equity due = Sale price - (End balance for total mortgage remaining inc. early repayment charge + costs associated with sale inc., solicitors fees, estate agent fees, housework in response to buyers survey) * Proportion of Equity due to Owner 1/2
2) Proportion of equity due to Owner 1 or 2 = e.g., for Owner 1 = (Percentage of total equity for owner 1 / (percentage of total equity for owner 1 + percentage of total equity for owner 2)) * 100
3) Percentage of total equity for Owner 1/2 = Equity from deposit + Equity from Mortgage 1 + Equity from Mortgage 2 etc... + Equity from Mortgage x
4) Equity from deposit for Owners 1 & 2 = e.g., for Owner 1 = (Owner 1's Deposit / Purchase Price) * 100
5) Equity from mortgage x for Owner 1/2 = e.g., for Owner 1 = (End capital paid by Owner 1 / house purchase price)*100
6) End capital paid e.g., for Owner 1 = Cumulative capital paid during mortgage x i.e., Owner 1's contributions to repayments inc. overpayments - interest calculated each month then summed for duration of Mortgage x

I think this floating share / commensurate share formula works, here is the formula applied to a house bought for 328995, where two owners initially pay equal deposits of 7.5% each (£24,677.50) and share the mortgage. But then after just one year owner number 2 stops paying the mortgage and owner number 1 takes up all the flack.

14 years in total and 4 mortgages later the mortgage is paid off:

https://drive.google.com/open?id=1lRz6JrpE9ULEIhtyAiIss2OEphh4XmcJ

for simplicity the model doesn't change the value of the house price but the facility to change this exists on the spreadsheet

.................Total Equity | Equity O1:O2 | Equity Due
Owner 1 | 91.05 ........|..... 91.05% ....|..£299,535
Owner 2 | 8.95 ........|........8.95% .....|..£29,460

Tom99 · 10 March 2018 at 1:28AM

ro2778 wrote: »

I think this floating share / commensurate share formula works, here is the formula applied to a house bought for 328995, where two owners initially pay equal deposits of 7.5% each (£24,677.50) and share the mortgage. But then after just one year owner number 2 stops paying the mortgage and owner number 1 takes up all the flack.

14 years in total and 4 mortgages later the mortgage is paid off:

https://drive.google.com/open?id=1lRz6JrpE9ULEIhtyAiIss2OEphh4XmcJ

for simplicity the model doesn't change the value of the house price but the facility to change this exists on the spreadsheet

.................Total Equity | Equity O1:O2 | Equity Due
Owner 1 | 91.05 ........|..... 91.05% ....|..£299,535
Owner 2 | 8.95 ........|........8.95% .....|..£29,460

[FONT=Verdana, sans-serif]I think you are getting closer now you are ignoring mortgage interest and only taking into account capital paid off the mortgage.

[/FONT] [FONT=Verdana, sans-serif]Where is the column for entering the house value at the end of each month so you can see the division assuming a sale at the end of that month?

[/FONT] [FONT=Verdana, sans-serif]Also how to you read off your equity split part way through, say at the end of year 4?

[/FONT] [FONT=Verdana, sans-serif]I think your formula only works because each is putting in an equal up front deposit. If the deposit is unequal then you can't have a single percentage split of what you have called equity ie sale price less mortgage and sale costs.

[/FONT] [FONT=Verdana, sans-serif]Take for example a house where A pays 50% cash and B pays 50% but on a mortgage. Using your formula equity split would be 50/50 all the time even if sold on day 2. But if the house was sold on day 2 then 100% of what you call equity would go to A and 0% to B since none of the mortgage B used has been paid off and the house has not gone up in value.

[/FONT] [FONT=Verdana, sans-serif]I think you need a three way split:

[/FONT]

[FONT=Verdana, sans-serif]To A: x% of sale price ignoring mortgage based on A's % deposit[/FONT]
[FONT=Verdana, sans-serif]To B: y% of the sale price ignoring mortgage based on B's % deposit[/FONT]
[FONT=Verdana, sans-serif]Then only the balance of equity after mortgage split via your floating formula which will vary month by month[/FONT]

Tom99 · 10 March 2018 at 1:36AM

[FONT=Verdana, sans-serif]PS: Posting on Google Drive shares your Google ID (maybe your real name?) which you may or may not be happy the share on this forum.[/FONT]

ro2778 · 10 March 2018 at 2:10AM

Tom99 wrote: »

[/SIZE][/FONT] [FONT=Verdana, sans-serif]Take for example a house where A pays 50% cash and B pays 50% but on a mortgage. Using your formula equity split would be 50/50 all the time even if sold on day 2. But if the house was sold on day 2 then 100% of what you call equity would go to A and 0% to B since none of the mortgage B used has been paid off and the house has not gone up in value.

Here I modified the spreadsheet to this story: https://drive.google.com/open?id=1Ty0YnTxqqLHqzIg6r7F5seDFY_y2K8AF

It seems to work, this is based on selling the house after 1 month and therefore Person B (called Owner 2 on the sheet) has made one monthly repayment, giving them a tiny amount of equity.

I used a house costing 328995 and gave A a 50% cash deposit and B no deposit but made be responsible for all the mortgage payments. I made the mortgage a 2 year fix at 1.64% over a 25 year term but I've only inserted the data under Owner B for 1 month. Have a play around, it seems to work.

edit: to answer your other questions,

1) You manually modify the house value in C3 under sale price
2) The spreadsheet allows you to input the actual data each month. Down in the guts of it, the actual monthly repayments made by owner 1 and owner 2 are altered by changing the % weight in the lightly greyed out columns H and O. If Owner 1 and 2 were splitting the mortgage then it would be 50 and 50%. If just one was paying it would be 100% and 0%. Then obviously you can have anything in between.
3) Because you enter the data each month, you can read it off whenever. If you want to isolate a particular month you just have to set the H and O columns to 0% and make sure all rows in those columns below are also at 0%

edit2: I think the spreadsheet is definitely working, although I just created it today, so it could be more automated and user friendly. I derived the written formula by working through the spreadsheet so there may be errors with that but I'm too tired to figure it out now

Tom99 · 10 March 2018 at 2:33AM

ro2778 wrote: »

Here I modified the spreadsheet to this story: https://drive.google.com/open?id=1Ty0YnTxqqLHqzIg6r7F5seDFY_y2K8AF

It seems to work, this is based on selling the house after 1 month and therefore Person B (called Owner 2 on the sheet) has made one monthly repayment, giving them a tiny amount of equity.

I used a house costing 328995 and gave A a 50% cash deposit and B no deposit but made be responsible for all the mortgage payments. I made the mortgage a 2 year fix at 1.64% over a 25 year term but I've only inserted the data under Owner B for 1 month. Have a play around, it seems to work.

edit: to answer your other questions,

1) You manually modify the house value in C3 under sale price
2) The spreadsheet allows you to input the actual data each month. Down in the guts of it, the actual monthly repayments made by owner 1 and owner 2 are altered by changing the % weight in the lightly greyed out columns H and O. If Owner 1 and 2 were splitting the mortgage then it would be 50 and 50%. If just one was paying it would be 100% and 0%. Then obviously you can have anything in between.
3) Because you enter the data each month, you can read it off whenever. If you want to isolate a particular month you just have to set the H and O columns to 0% and make sure all rows in those columns below are also at 0%

edit2: I think the spreadsheet is definitely working, although I just created it today, so it could be more automated and user friendly. I derived the written formula by working through the spreadsheet so there may be errors with that but I'm too tired to figure it out now

[FONT=Verdana, sans-serif]I still don't think its right as you are basing Owner 2's equity on the amount of capital mortgage they have repaid rather than the total mortgage they are supporting.

[/FONT] [FONT=Verdana, sans-serif]Put in an unrealistic sale price of £657,990 after one month (100% increase). You would expect Owner 1 to get back about £328,995 and Owner 2 about £328,995 less mortgage of £164,054 so £164,941. But your formula would only give owner 2 £1,329.

[/FONT]

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commensurate share deed

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