“
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.