Dividing house, is this fair or not?

[geranium66]

Bought a house 2 years ago with partner. We’ve separated. The house has increased in value by 30%. My brother is taking over his side of the mortgage for the future; I will stay in the house. I plan to give my ex partner back all the monthly mortgage payments he has paid, plus his deposit and increase it all by 30%. Would you consider this fair or is there a better way of working it out?

You will also have made a considerable amount of money, you just aren't cashing it in.
If you pay them back their mortgage payments then they will have had two years of free living.
Usual starting point is deposit back + 50% of equity.

Just give us the actual figures and we will tell you.

@geranium66 it’s not half the value, it’s half the equity

it’s:

current market value
minus mortgage left
minus help to buy part that you’re taking care of (that’s the bit I’m not sure about)
= the equity
then divide that by 2

The way you are wanting to do it will be much cheaper than the normal way of value of house less mortgage and other debts secured then divide by 2.

Do the sums and see what the figures are.

Yes. This seems the only way to work it out.

The way you suggest - his £10k investment plus 30% would only give him £13k

I can see why you would want to calculate it that way but no, it would not be fair.

Right ok. I think I see. Yes everything was 50/50.
So using the figures above. He’s turned 10k deposit plus about 3k mortgage contributions into 25k, when the house has only increased in value by 30%.

My only clarity in this is that I’m now paying off his share of the help to buy element of the mortgage, so I’ll subtract his half from the figure. This would then look right to me and equate to a 30% gain on his contributions to the whole thing.

What doesnt heget a share of the increasein value?

if the shoe was on the otherfoot - you were the one oming out of the arrangemen, would you think it was fair?

Example
10K each deposit + 80k Mortgage buys 100K property

property now worth 150k

minus mortgage = 70 k value

he gets 35K

Standard formula!

Wouldn't you be better off selling? Giving him half the equity when house prices are uncertain at the moment could mean he makes a profit and you end up in negative equity at some point.

What’s the figures @geranium66 geranium

There’s no 30% gain on his contribution. The 30% relates to the value of the house.

If your brother is taking over the mortgage and ownership, the rent for the help to buy bit is yours and your brother responsibility.

But so have you.

That's the beauty of the housing market and why so many people borrow to invest in if. It's money for nothing.

You made the investment together, you both benefit equally.

On your sums, he makes £13k on the whole thing while you walk away with £37k for exactly the same investment. How is that fair?

Original price £288000 now £375000.
deposit 10k each
remaining mortgage 190000
help to buy 50000

“If you take the new valuation of the house, subtract the remaining mortgage and divide in half it’s a vast amount of money. If you look at this figure and compare it to the amount actually spent by my ex. He will have made a considerable amount of money from this if that is the case.”

But so have you! That’s the benefit of buying a house in a rising market.

If you bought as Tenants in Common then he will legally own a specific share of the house and will carry on owning it until someone buys it off him. If you bought as joint tenants then for the purposes of a split (assuming not married and no kids) then he’s entitled to half the equity. He’d be a fool to accept less, and it would be very unfair.

Remember that help to buy is a percentage of the value rather than a monetary amount.
I would say

Total current value
Minus % still owner by help to buy scheme
Minus outstanding mortgage amount =equity
Then divide equity by 2 and this gives you the amount of equity you are each due.

I work for a factoring company who are also a registered social landlord and process shared equity sales.

So there's £135 equity in the house at current value - mortgage, help to buy.

The original price and deposit are irrelevant as you both but in equally.

So that's £67.5k each.

Yes. I can see why you only want to give him £16k.

If you did , that would mean you made £119k on your £10k investment.

That doesn't seem fair to me.

If you rented and separated, the landlord wouldn't give him back all his rent contributions because you don't get to live for free - which is what he'd have done if you give him back his deposit, any contributions + interest and his equity.

Surely it should be his deposit + 50% equity - any costs involved in the process??

£18,500

I would also add that given the housing market is about to rank, I'd be tempted to sell completely. .

So there’s 135k equity?

Al his share is 67.5k

Sorry minus his share (50%) of legal costs

That's the net price as the£50k hasn't been paid down and remains as a liability. Less mortgage divided by 2.

Yes 67,500 less his share of legal costs.

I’d be keen to sell too. Only give him half of what you actually get.

You are likely to be paying him off and then ending up in negative equity soon. Plus mortgage rates up.

Yes, I agree with this. If it’s £67,500, he would have turned 10k deposit and about 3k mortgage repayments into 67k in a matter of two years. That’s mad surely.

Are you sure the house has really increased in value by that much? Where do you live?