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  • FIRST POST
    • ro2778
    • By ro2778 7th Mar 18, 10:37 PM
    • 91Posts
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    ro2778
    commensurate share deed
    • #1
    • 7th Mar 18, 10:37 PM
    commensurate share deed 7th Mar 18 at 10:37 PM
    Edit: Trying to figure out a formula to record ongoing unequal mortgage contributions in the form of initial deposit, repayments and overpayments. The formula below still has some flaws

    Formula to derive equity due on sale, in a floating share / commensurate share deed
    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!

    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


    credit: all the mortgage values were extracted from mortgage schedule calculator spreadsheet
    Originally posted by ro2778
    Last edited by ro2778; 10-03-2018 at 8:49 AM. Reason: for brevity
Page 2
    • Tom99
    • By Tom99 9th Mar 18, 8:21 AM
    • 2,261 Posts
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    Tom99
    do the apple example with houses
    you buy 2 houses for the same amount one pays cash one borrows the money clearly they own 100% of their own houses.

    Combine resources too get a bigger house and suddenly the one borrowing money owns more than 1/2.
    Originally posted by getmore4less
    Keep it up, you will get there in the end and I am enjoying you examples!
    • ro2778
    • By ro2778 9th Mar 18, 5:11 PM
    • 91 Posts
    • 31 Thanks
    ro2778
    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.
    Last edited by ro2778; 09-03-2018 at 8:28 PM.
    • getmore4less
    • By getmore4less 9th Mar 18, 8:54 PM
    • 32,192 Posts
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    getmore4less
    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
    • By ro2778 9th Mar 18, 9:13 PM
    • 91 Posts
    • 31 Thanks
    ro2778
    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!
    Last edited by ro2778; 09-03-2018 at 9:35 PM.
    • steampowered
    • By steampowered 9th Mar 18, 10:09 PM
    • 2,598 Posts
    • 2,541 Thanks
    steampowered
    Total wrong understanding of how equity and serving debt works
    Originally posted by getmore4less
    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.
    Last edited by steampowered; 09-03-2018 at 10:11 PM.
    • steampowered
    • By steampowered 9th Mar 18, 10:20 PM
    • 2,598 Posts
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    steampowered
    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?
    Originally posted by getmore4less
    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
    • By ro2778 9th Mar 18, 10:35 PM
    • 91 Posts
    • 31 Thanks
    ro2778
    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
    Originally posted by ro2778
    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
    Last edited by ro2778; 09-03-2018 at 10:48 PM.
    • Tom99
    • By Tom99 10th Mar 18, 12:28 AM
    • 2,261 Posts
    • 1,532 Thanks
    Tom99
    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
    Originally posted by ro2778
    I think you are getting closer now you are ignoring mortgage interest and only taking into account capital paid off the mortgage.

    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?

    Also how to you read off your equity split part way through, say at the end of year 4?

    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.

    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.

    I think you need a three way split:

    • To A: x% of sale price ignoring mortgage based on A's % deposit
    • To B: y% of the sale price ignoring mortgage based on B's % deposit
    • Then only the balance of equity after mortgage split via your floating formula which will vary month by month
    Last edited by Tom99; 10-03-2018 at 12:35 AM.
    • Tom99
    • By Tom99 10th Mar 18, 12:36 AM
    • 2,261 Posts
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    Tom99
    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.
    • ro2778
    • By ro2778 10th Mar 18, 1:10 AM
    • 91 Posts
    • 31 Thanks
    ro2778
    [/SIZE][/FONT] [FONT=Verdana, sans-serif][SIZE=2]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.
    Originally posted by Tom99
    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
    Last edited by ro2778; 10-03-2018 at 1:21 AM.
    • Tom99
    • By Tom99 10th Mar 18, 1:33 AM
    • 2,261 Posts
    • 1,532 Thanks
    Tom99
    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
    Originally posted by ro2778
    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.

    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.


    Last edited by Tom99; 10-03-2018 at 4:16 AM.
    • ro2778
    • By ro2778 10th Mar 18, 1:42 AM
    • 91 Posts
    • 31 Thanks
    ro2778
    humm, I see what you mean, I'll come back to this soon, thanks
    • Tom99
    • By Tom99 10th Mar 18, 2:06 AM
    • 2,261 Posts
    • 1,532 Thanks
    Tom99
    humm, I see what you mean, I'll come back to this soon, thanks
    Originally posted by ro2778
    Using another example to illustrate the same point. If you assume the mortgage was an interest only one, then I think your formula would not allocate any share to the party paying that mortgage and it would not matter how owner 1 and 2 split the mortgage, all of the equity would go in proportion to the initial deposit and nothing to that element of the purchase price being supplied by the mortgage.

    I think your formula would also need to accommodate when in the ownership period a contribution was made. So if Owner 1 pays the mortgage in year 1 and Owner 2 pays the same amount in year 10, Owner 1 should have accumulated 9 years of growth which Owner 2 would not have done. I suspect your current formula treats both contributions the same.

    You could achieve that by revaluing the property at the end of each month and starting the next month afresh. A straight line between purchase price and sale price could be used to do that.
    Last edited by Tom99; 10-03-2018 at 4:15 AM.
    • ro2778
    • By ro2778 10th Mar 18, 9:07 AM
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    • 31 Thanks
    ro2778
    I found this article on a couple asking for help to determine how to calculate equity given unequal shares: https://www.theguardian.com/money/2016/nov/10/how-can-we-calculate-what-we-have-each-contributed-to-our-house

    In this, there is an interest only mortgage and because one person didn't pay off any capital, his contribution to interest is disregarded. I take it you would disagree with this advice? I mean... it does seem harsh on the bloke in that relationship! Also they have weighted money spent on a loft conversion as equal to deposit which I very much disagree with. Humm when I started this process I thought there would be some well established formula, didn't realise it would require so much DIY.
    Last edited by ro2778; 10-03-2018 at 9:09 AM.
    • ro2778
    • By ro2778 10th Mar 18, 9:19 AM
    • 91 Posts
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    ro2778
    One of the comments suggests and interesting method

    smilerjames 10 Nov 2016 9:57

    8
    9
    We had a similar problem and lawyers weren't great so we drew up our own agreement based on their drafts. Most of these documents and the above example have a flaw IMHO when it comes to relationships, they treat everything as a % of the house forever and create a situation where one person owns more of it than the other.

    I drew up the following. We treated deposits and additional payments as loans to a fictional joint entity that held the house together. These personal loans to the joint entity acrue interest just as if they were in the bank - this was done to protect deposits against inflation - while inflation is low currently long term its likely to run at ~2%. If your boyfriend complains about this tell him to go to the bank for his 50% and get a better rate....

    These loans are repayed to each of us after the mortgage has been settled. The remainder of the house is then split 50/50. If you stay together for a long time you will get closer to owning 50% each.

    This structure allows us to benefit evenly from any price gains while also sharing the risk of falls in house price. Its also protecting our prior savings. We have adjusted the 'loan' part of the document when we have had things like inheritance payments.

    We also chose to merge our bank accounts when we bought the house so that we didn't have these persistent arguments about who was contributing what. I earn more so I suggested this - it would appear the ball is in your court here from the figures as you look to have more money than he has. Neither of us are big spenders. I think its a concern that after 10 years together you are still not working together financially.

    I have also done a lot of work on our house but my wife contributes other work. I think how you treat his work really depends on whether its meant he earns less money from his day job or whether this has been done in spare time while you are cooking dinner or out partying. Keep in mind that a professional is much faster at a job so you can't expect the same hourly credit for your tiling if you go down this route.

    In your case you would have a loan to the joint entity of £126K and he would have one of £22K depending on how you treat his work. Over 10 years your loan has increased to £~150K and his has increased to ~£26.5K.

    If the house price is now £400K then after the mortgage is paid off you would have £220K left. You would receive £150K and he would get £26.5K for your respective loans. The remaining £43.5K would be split 50/50. In the end you would get £171.5K and he would get £48K.

    If the house price is still £257K then you would each still get £150K and £26.5K. After the mortgage is repaid then there would be £77K left and a deficit of £100K after the personal loans. You would each owe the entity £50K so you would get £100K back and he would in effect owe you £23.5K.

    Its important that whatever you do you both share in the risks and rewards. Perhaps more importantly, 10 years on you need to be functioning together as a financial unit rather than planning for separation.
    • Tom99
    • By Tom99 10th Mar 18, 9:25 AM
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    Tom99
    I found this article on a couple asking for help to determine how to calculate equity given unequal shares: https://www.theguardian.com/money/2016/nov/10/how-can-we-calculate-what-we-have-each-contributed-to-our-house

    In this, there is an interest only mortgage and because one person didn't pay off any capital, his contribution to interest is disregarded. I take it you would disagree with this advice? I mean... it does seem harsh on the bloke in that relationship! Also they have weighted money spent on a loft conversion as equal to deposit which I very much disagree with. Humm when I started this process I thought there would be some well established formula, didn't realise it would require so much DIY.
    Originally posted by ro2778
    Yes totally wrong, the boyfriend has put in £20,300 plus 50% of mortgage, £90,000 = £110,300 so his share of any increase in value is a lot more than 15%.
    Last edited by Tom99; 10-03-2018 at 9:40 AM.
    • ro2778
    • By ro2778 10th Mar 18, 9:31 AM
    • 91 Posts
    • 31 Thanks
    ro2778
    More food for thought from comments:

    leadballoon 10 Nov 2016 13:46

    2
    3
    It doesn't really matter whether you are married or not, if there are no children or other dependants when you split you want an equitable agreement. I have no idea what the answer above is advocating, on the one hand a "standard" deed of trust example has
    if one of you put down £20,000 and the other £10,000, but you split the mortgage equally, on sale and after clearing the mortgage debt, person one would get their £20,000 back, person two, their £10,000 with anything left over being split down the middle.:
    Which splits any increase or decrease in the value of what you bought with your loan in half. Yet the example calculation in this case is:
    Your total contributions as a couple would be £148,711.38 (ie £126,411.38 plus £22,300), a figure that enables you to calculate the percentage you have each contributed to the value of the property. So your share as a percentage is 85% while your boyfriend’s is 15%. So if you were to sell the property, after paying off the mortgage and paying selling fees, whatever was left over would be split 85:15 in your favour.
    Which is completely different because it takes no account of the borrowed capital. Neither example is financially acceptable without taking into account return or risk on the original investment including the amount borrowed.
    Your initial investment was purchase price plus buying costs such as stamp duty and solicitor fees. Calculate your contributions as percentages of that. Assuming your mortgage of 180k is serviced equally by both of you, paying half the interest (actually mortgage plus fee but round the figures for the example). That too is a percentage of the original investment. If the proceeds of sale after selling fees has risen over the buying cost by, say, 20% then all percentages are applied as they were at the original investment. So that capital financed by the 180k mortgage as a percentage increased by 36k and you are each due 18k. Your 66k input (in round numbers) increased by about 13k, your boyfriends 20k increased by 4k and so on. If the house value fell, you get a reduced return (possibly owe money as "negative equity") based on the original percentages; that's the risk of investment.

    If subsequent improvements have added value, such as the loft conversion, then that adjusts the percentages. Several ways of doing that, You could value the work as if it were done at the time of purchase, that's reasonable if it was planned at that time and done soon after. You could value it as if it were recently completed, just repay it out of the final proceeds. Or, you could try to estimate the value added at some mid point in your ownership. The value of the conversion would increase or decrease as the value of the house changed; base it on a valuation of the house at the time (try one of the property sites such as zoopla if you didn't ask an estate agent at the time) or linearly, say 5 years into your 10 year ownership the increase in that investment is half the overall house value increase.

    Contributions in labour, such as plumbing or tiling are harder. If there are specific projects, such as boiler replacement or plumbing for the loft then you could try attributing a cost. Otherwise it may be simpler to treat those as remedying wear and tear which you contributed equally to at the time.
    • ro2778
    • By ro2778 10th Mar 18, 9:42 AM
    • 91 Posts
    • 31 Thanks
    ro2778
    I'll come back to this next week, unfortunately I have to work on a less interesting project this weekend!
    • Tom99
    • By Tom99 10th Mar 18, 9:51 AM
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    Tom99
    The 1st example is broadly correct:

    if one of you put down £20,000 and the other £10,000, but you split the mortgage equally, on sale and after clearing the mortgage debt, person one would get their £20,000 back, person two, their £10,000 with anything left over being split down the middle.:

    However what it should say it that the £20,000 and £10,000 each buy a %age share, then on sale each gets the %age share their deposit bought based on the sale price and what's left less the mortgage is split 50/50.
    • getmore4less
    • By getmore4less 10th Mar 18, 10:50 AM
    • 32,192 Posts
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    getmore4less
    I found this article on a couple asking for help to determine how to calculate equity given unequal shares: https://www.theguardian.com/money/2016/nov/10/how-can-we-calculate-what-we-have-each-contributed-to-our-house

    In this, there is an interest only mortgage and because one person didn't pay off any capital, his contribution to interest is disregarded. I take it you would disagree with this advice? I mean... it does seem harsh on the bloke in that relationship! Also they have weighted money spent on a loft conversion as equal to deposit which I very much disagree with. Humm when I started this process I thought there would be some well established formula, didn't realise it would require so much DIY.
    Originally posted by ro2778
    If we break it down

    starting point is relatively easy
    boyfriend and I bought a house together for £257,000 plus fees. At the time, I put in around £66,400 and he put in £20,300. Our initial interest-only mortgage was £180,000 plus the arrangement fee of £781.88, which was added to the loan
    .

    Deposit 1 £66,400 (24.82%)
    Deposit 2 £20,300 (07.59%)
    Mortgage £180,782 (67.59%)
    total cost £267,482

    As the mortgage is paid 50:50 that sets the starting shares
    58.615% & 41.385%

    for example, I recently paid £45,000 for the loft to be converted and we are having difficulty working out what counts and whether the time of contribution makes a difference.
    lets deal with that as timing does make a difference.

    if it was paid day 1 it would count like the deposit,
    if it was paid on the last day it would just be a cash debt against the total.

    it will be somewhere in the middle.

    There are a couple of relatively simple ways to deal with this,

    1. You can reset the clock/equity by doing a virtual sell and buy
    you value the place and work out your shares you then add £45k to that value and the person that paid gets that added to their new deposit you then rework the % including any mortgage that's left.
    (most people can get their head round that simple approach**)

    2. you adjust the debt (no need to value)
    Any maintenance/improvements should be paid for at the % of ownership
    in this case this £45k should be paid £26,377 and £18,623

    You could do this as an interest free loan and leave the mortgage as is or you can change the amount of debt you each service to reflect the debt, you do this by effectively transferring £18,632 of the debt across then work out the new split of the mortgage payment so it is no longer 50:50, in the above example with interest only on £180k it goes from £90k each to £72k & £108k

    An easy way to understand that is in your head you each add the amount you owe to the debt and the one that pays takes that off their share of the debt.

    You can deal with any work done in this way where one pays more than another either revalue and adjust shares or just adjust the debts.

    Overpayments work in a similar way if you adjust the debt % no need to revalue and adjust shares.

    The way the maths works with mortgages(both interest only and repayment) as long as you pay the % of the payment that reflects your % of the debt you want to service is just works.

    -----------------------------------------
    ** Once you sort out that simple way to deal with the cash injections there is a secondary consideration that can rear up

    You might get the I paid £45k for the loft conversion but it added £100k to the value.
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