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?

Not at all if this is the realistic increase in value over 2 years. On your estimate, on paper you have both ‘made’ quite a lot of money.

In which case, maybe offer him a compromise.

Everyone thinks the housing market is about to fall (depending on where you are) so maybe take the lowest of the valuations

He could be quids in as you're buying him out at the top of the market - which I agree is galling.

Your plan would give him far more than his fair share.
Yes his deposit should be given back to him at +30%.
For each of his half of the payments, the majority of that money went to paying interest on the mortgage, that is a servics he received and paid for from the bank, he doesn't get that money back. If he did he would have been living rent free for years. Not reasonable.

A small slither of each monthly payment wwnt to paying off the mortgage and he should have a fair slice of that. But it will be WAY less than what you propose in your OP.

On the day you bought, the value was the price you paid and that was made up of equity that was your deposit, his deposit and the remainder was the mortgage money from the bank.

As you split, the value now is made up of equity that is the increase in value of your original deposits, equity that is the result of the anount of the mortgage amount owed that has been paid off, and the remaining amount owed to the bank.

So check what the bank says is still owed, and subtract that from the original amount of the mortgage. Call that value A. Your ex gets half of A if he has been psying half the mortgage payments.

The rest of the equity (realistic house value minus outstanding mortgage minus A) should be split in the same proportion as the amount originally contributed to with your respective deposits.

Your brother surely needs to pay this if he is going to become joint owner?

The Estate Agents may have valued the house at £375,000 but in reality if you were to sell house, buyers would probably offer 10%/15% less. Maybe you need to ask ex partner what he would accept and work on this.

What is your plan with your brother becoming co-owner? Going on the mortgage, what?

Thank you for this

Yes brother is paying and just replacing partner on mortgage.

Would anyone seriously walk away with 18.5k when you could potentially gain 67.5k at the top end! I highly doubt it.

If you are unable to agree on a payout, the only option and the most fair, will be to sell the property and split any proceeds between you!

How quickly do you have to decide? There are rumblings around a house price crash (which may never happen). Can you stalk in case prices go down?

Without getting tied up with numbers, this is very very simple.

You contributed equally when you bought the house and you contributed equally to the mortgage.

So whatever the house is worth now, you are each entitled to half of it.

The tricky bit is working out what it's worth now. This is whatever you could sell it for now, minus anything you'd have to pay if you sold it (eg outstanding mortgage, early redemption fees, other loan repayments, selling costs etc). If you actually sell you will know what this comes to. If you don't sell, you will have to agree on a likely selling price and work everything out based on that.

As long as you've contributed equally throughout the actual amounts contributed are a red herring.

So your exp does not need to compensate you for for the help to buy rental payments going forward. That’s yours and your brothers responsibility from when your brother takes over as co-owner.

What do you mean by this, though?

He can’t just ‘replace’ your partner without going through the bank and taking out a new mortgage in his name. So he can pay

Do you mean he’s paying 50% of the monthly mortgage payment as rent?

So your brother is going in the mortgage of £190,000 (£240,000 including help to buy). Plus whatever he pays your brother - possibly £18k

And he gets £50% of a house worth £350k.

He is getting an absolute bargain!

Yes sure.
it was a help to buy equity loan

I'm not sure your solicitor is great if he can't advise you what the usual split would be for 50/50.

As you can see, it's pretty standard and universally accepted to be what people here are telling you.

This is unlikely to be in the best interest of your brother
Is he losing a 1st time buyer status- if not will he be lying a 2nd home premium?
What happens if you need to sell? (prices will fall in next 5 years)
What if you have children?
He mets a partner? He has children?
One of you loses your job?

Also I would laugh in your face if you offered me your original figure, but I can see how that looked nicer to you!

That is a good ping @olddustbag

My brother needed his son to go in his mortgage (limited company, no accounts etc).

As a result, his son lost his FTB status.

Now DN is buying his own house, my brother is paying his stamp duty for him as he is the reason it is more than it would have been.

Are you tenants in common or joint tenants?

I would for simplicity imagine you are selling - if it cost £100k with a 10% deposit and has increased 30% it's worth £130k. The equity is £40k. You return his £5k (share of deposit) plus £15k as his share of the increase of value. He should however pay for at least half the legal fees because if you were selling he would be paying then.

If he accepts less than this calculation that's ok but not wanting more!

You will also need a new mortgage with no help to buy and probably a high interest rate- is that affordable?

Your brother needs to buy into this investment, so if you pay ex out, then after a year you sell, what share would you and your brother get? If it's 50/50 that is massively unfair, you've paid deposit +years of half mortgage +paying ex off.
If brother pays ex off, then he is equal to you
And doesn't mortgage need redoing?

I still think you should sell unless you absolutely love the house and are willing to end up in negative equity and your brother resenting buying him out at an inflated price.

You might be much better off selling, keeping the equity you get as a deposit for a house in the future in a year or two time and renting in the mean time to see how the market goes. You'll still be better off financially than you were 2 years ago as you'd potentially have a 67k deposit instead of 10k. And your brother wouldn't be taking on any risk for you.

Has the mortgage company said that your brother can just replace your partner?
That is not usual. It would need a full remortgage. Help to buy may then be lost. Have you understood it correctly?