Talk

Advanced search

Mumsnet has not checked the qualifications of anyone posting here. Free legal advice is available from a Citizen's Advice Bureau, and the Law Society can supply a list of local solicitors.

Buying a house, how to protect our £?

(34 Posts)
Downwiththatsortofthing252 Wed 17-May-17 23:58:44

A little background: Myself and DP have been together for nearly 6 years, not married, and have a 1 year old DS.

We are buying a house together, and getting towards the end of the process. There is one sticking point; we both want to be sensible and set it down in writing how to split the proceeds of any house sale if we ever broke up.

We are going to get a deed of trust done, but can't agree on how to protect our uneven deposit amounts. We will both be paying 50% of the monthly mortgage going forward.

The deposit is £26,000; A will be putting in £21,000, B will be contributing £6,000 (figures made up but comparable to RL).

A wants the deed of trust to reflect the percentage of capital put in. So if the house was sold in future for a higher price, then since they put in a larger amount of original deposit, they should get a larger amount back of the sale proceeds.

B wants each person to get back their original deposit, and then split the rest of profit (if any) 50/50, since the monthly payments are 50/50.

This is all hypothetical, since we don't have plans to split, however it's causing arguments so would like some other perspectives on this please! Who is right?

lumpit Thu 18-May-17 00:03:53

B

notangelinajolie Thu 18-May-17 00:15:07

B

AndNowItIsSeven Thu 18-May-17 00:15:16

Neither you have a child you are a family , why all the ridiculous mine and their money?

AyeAmarok Thu 18-May-17 00:20:06

B.

A doesn't sound very nice.

Downwiththatsortofthing252 Thu 18-May-17 00:21:23

Thanks for the reply, reading back I don't think I've written A's position clearly. Just to clarify, A wants to base the deed of trust on the percentages put in, so both get a return on the original capital,and then split any remaining profit 50/50

So say the house cost £100,000, then A put in 21%, B put in 6%, rest is mortgage. If house is later sold, and maybe for a higher price of £120,000, then A would get back 21%, B 6%, any profit left would be 50/50.

Sorry for the long post and lots of figures, I hope its clear!

Movingin2017 Thu 18-May-17 00:25:39

Definitely B not A
There is a third way

Each get original deposit back
Each get reduction to capital on mortgage (eg at the time of sale if you have jointly reduced the amount owing on the mortgage by say £50k you'd get back 50:50 £25k each)
Any additional increase in equity in the proportion on which you paid the deposit ie 78/22 per cent split

AyeAmarok Thu 18-May-17 00:26:19

Still B. A being a bit selfish and greedy. Sorry!

WhatsGoingOnEh Thu 18-May-17 00:26:59

Why does A get so much more? What's the reasoning?

I don't think you could say, "B wouldn't be able to get a house without A and their bigger deposit!" because A wouldn't be able to borrow as much mortgage without B's regular salary. So it's not as though B is holding A back financially. In fact, B is helping.

Whoever A is in this scenario (I have a suspicion who it is), they are still thinking like s single person.

WhatsGoingOnEh Thu 18-May-17 00:29:30

This might all be hypothetical if house prices fall after Brexit anyway. Or WWIII breaks out. I think you should both focus on having fun together, not tussling over figures which (hopefully!) will never see the light of day again.

Downwiththatsortofthing252 Thu 18-May-17 00:38:38

Movingin2017 Thanks for the third way, I'm trying to see if there's another way to do things, but it's late and my brain isn't on top form grin

Whatsgoingoneh I agree, splitting up is not something I see happening (otherwise we wouldn't be buying a house!) and so many other things could happen in the meantime, but we're trying to be sensible and think of all angles, unpleasant and all

Vrooooom Thu 18-May-17 00:50:11

Either A or B is ok and both are fair. I think I'd go for B though. It's simplest.

caroldecker Thu 18-May-17 00:51:37

A should get a bigger return as larger investment. If A and B purchased shares in a company 21% and 6%, no-one would think B should get more return.

It should be down to the equity owned by each, which will vary over time. For example (assuming repayment mortgage and changing % for ease):

Day 1: 20% A, 5%B and 75% mortgage company
Halfway through mortgage: 20% +1/2 of 37.5%=38.75% A, 5%+1/2 of 37.5%=23.75% B, 37.5% mortgage company
End of mortgage: 20%+1/2 75%=57.5% A, 5%+1/2 75%=42.5% B

I accept that halfway through the mortgage term, less than half the capital is returned, but this appears to be the fairest way.

notangelinajolie Thu 18-May-17 01:12:19

Still B. It's good to talk but all this his money/her money stuff does not bode well - A is cold and caluclated. You are a couple in a loving relationship with a child - act like one and commit to each other as EQUAL partners.

GU24Mum Thu 18-May-17 12:48:07

So say you are buying for £100, A is putting in £21, B is putting in £6 and the mortgage company is putting in £73. Can't you do say that for 73% of any sale value, once the mortgage is paid off that sum is split 50/50 and then after that it's split 21:6 whether that's a gain or a loss. Or is that very over-complicated?!

Downwiththatsortofthing252 Thu 18-May-17 22:08:10

caroldecker and GU4Mum That's A's point of view exactly, you've both put it better than I could write!

Downwiththatsortofthing252 Thu 18-May-17 23:18:30

To out myself, I'm B, as might have been obvious before grin

I really do get where my DP is coming from, in terms of business dealings his option is definitely the way it should happen; the person who puts in the most money is most at risk and so should get the most back.

But since we're both in this together, and we'll be splitting the monthly payments equally, it seems to me that we should both benefit equally from paying off the mortgage and any increase in market value.

Any other way seems a bit ...cold, as a pp has said.

User06383 Thu 18-May-17 23:32:04

A.

If the house cost £100k, deposit A was £20k and deposit B £5k, then in the event of a sale A would receive 20%, B would receive £5%. The remaining 75% less fees would then be split equally.

Over the course of the investment £20k today is worth more than £20k in 20 years so this would take inflation into account.

caroldecker Fri 19-May-17 00:54:00

downwithit My method does reflect your 50% of the mortgage payments.
Take an exagerated example:
£1,000,000 house
A puts in £1
B puts in £999,998
Mortgage £1

Each pays 50p on the mortgage

Split up 12 months later and sell the house for £1,030,000 - 3% price increase.

In your scenario:

A gets £1,015,000
B gets £15,000 for a £1.50 investment.

Swirlysunshine Fri 19-May-17 01:14:34

Hi OP I have recently had to go through the same process with my DP, but I was the person A in your scenario. We went with exactly as user06383 suggests. When we went through all kinds of scenarios, what if house prices go up, what if they go down using real numbers it seemed fairest.

Smitff Fri 19-May-17 01:19:16

A is what investors/business partners do.

B is what loving partners and co-parents who are thinking of their DCs' futures do.

Swirlysunshine Fri 19-May-17 01:42:44

I don't agree with the above comment. I think that A take into consideration that you were both in different positions when you came into a relationship. For example when I bought a house with DP it was the third house I've owned in my time and as such I have a decent deposit to put into our house. He is 8 years younger than me and our joint home is his first home. He barely had any money but wanted to contribute what he had. I have two children from a previous relationship. How would it be fair for us to end up in the same financial position as each other if we broke up tomorrow? With me having been on the housing ladder for 15 years and him 1 year?

Laineymc7 Fri 19-May-17 02:41:03

B I bought a house with extra partner many years ago and put in the majority of the deposit. I could not have got the mortgage and house with ex partner so we had a deed of trust like option B. This is much fairer and less greedy in my opinion. B's investment is still protected and they still get half of any profit.

Ellisandra Fri 19-May-17 14:10:22

A is fairest.
A is what friends would do.
Yes, in a partnership A would pay more for the same thing than B - e.g. If they went on holiday.
But if A and B split, they're not partners.
You want to poop your assets - that's marriage. You're not married.

But... just to be awkward, if B had less money to put into a deposit because B had gone part time to look after the child of A & B - then you're getting into a more complex situation.

I would do it the "business" way, and in fact did - including subsequent divorce (when I could have then claimed 50/50, but informally went for the A scenario) so I have put my money where my mouth is.

Ellisandra Fri 19-May-17 14:11:08

*pool

Join the discussion

Join the discussion

Registering is free, easy, and means you can join in the discussion, get discounts, win prizes and lots more.

Register now