To ask how to divvy up house with DP?

[HouseQuestions]

Please help - I’m so lost. I’m buying a property with my partner (not married). Property price is £131,000. I am putting in all the deposit, which is £40k, plus all legal fees etc. Altogether my contribution is about £42k.

Mortgage is in both our names and repayments will be split 50/50. I couldn’t afford to pay much more than 50% of the repayments, and wouldn’t have been approved for the mortgage without my partner.

I thought the fair thing would be to draw up a document stating that if we split up or sell the house I get my £42k back and then we split the rest 50/50. My solicitor is now drawing this document up. But a family member has suggested I should own around 65% of the property and my partner 35%, as all deposit is coming from me and I will lose out due to inflation if I just ringfence the £42k.

WIBU and greedy to ask for share of ownership that reflects my larger input in this way? What about the mortgage repayments? Would my partner lose out if I own more but he’s paying 50% each month? I don’t want to do him out of his fair share.

What is fair in this situation? What is normal? Our solicitor is useless.

I would do it the way you initially said. You are saying 65% going on todays circumstances....what if the prices really crashed, would you still want your 42k or would you be happy to own 65% of nothing. Stick to your original plan, anything else just sounds complicated and if I was
in your partners shoes I would not be happy paying 50% of a mortgage
if I only own 35% of the property.

Neither option is ideal. The option where your £42,000 is ring fenced leaves an unacceptable risk to your partner that he could end up in debt with no property if the house is sold at a time it is worth less than it is at present and the option with a fixed percentage fails to consider the fact that interest on the mortgage reduces the percentage of the true cost of buying that is covered by the deposit. Unless you are also splitting all hosehold bills 50/50 and are planning on doing that for the next 25+ years it may also underestimate the true contribution of one of you towards the mortgage.
Overall the best option is probably keeping the £42,000 for yourself.

I think your original plan sounds fair. you will still benefit from inflation on the mortgage payments and your original investment is protected.

If interest rates go up, prices go down or you split and sell the property quite soon after buying and have to go into the deposit to pay estate agent fees etc. you could end up with less than £42k after a sale - with a percentage split you would then only get 65% of that.

Where does she get 65% from??

42k of 131k is 32%

So you either ring fence 42k or 32%
so if property sells for 100K you get either 42k or 32k. If it sells for 200k you get 42k or 64k. And on top half of what's left

Expecting twice what you put in PLUS hf of the rest of bloody cheeky

Stick to original

You own 32% of the house value plus 50% of whatever else is remaining when it's sold (presuming you pay 50% of mortgage). That's what you should agree to.

If you agree to you getting back just the deposit amount of £41k then that's bad because the house will eventually go up in value and the £41k will only be worth less due to inflation. Of course the property could go down a bit but long term it'll keep rising in value with inflation.

Remember no mortgage interest is being paid on that 32% deposit so your OH is benefitting from your deposit too by not having to pay any interest (which would be a very significant sum over the life of a mortgage).

40k is in the house the other 2k is fees ( i think the 2k has to be ignored really)
40/131 is 30.5 %, call it 30% for simplicity, the other portion is 70 ie 35% each; so it is correct that a 65/35% split is reasonable for this to remain reasonable they must put in 50% each to repayments regardless of earnings, however if OP earns less than her partner it would be fairer to keep her 40K of equity and if they split the rest of the equity is split according to repayments
This all sounds reasonable until children arrive or they get married
I think it would be reasonable to revisit this in 5 years or if any major change in circumstances say for instance if OP or OP's partner gets a bonus, pay rise, inheritance or lottery win and can pay a chuck of mortgage off

if you have never lived together before I would prioritise ring fencing 40k as an early split means almost certainly no new equity after fees

I would say % is fairest way to do it but there are reasons for both ways. From your point of view you will either be liable to lose more if house prices crashed and you took % or if they rose and you just took the 42k back you would lose out on interest/investment growth.

There is no correct answer for this that someone can give you, its a decision you need to make based on what you think is best for you.

Have you spoke to your DP about it?

We did the %, yes the deposit was mine, but so should the risk on that part be mine. The rest of the house value (be that less or more than original value) would be split 50/50

Thanks for replies all! This is a boring/complicated topic I know so I appreciate your help. So much here I hadn’t considered.

Okay sorry to drip feed, tried to include everything important in the OP but forgot to say we always split bills 50/50. We have separate finances and no intention of kids so we will most likely keep doing this, though I recognise we might need to reassess things if that changes.

Partner and I are both low earners earning a similar amount of money (usually roughly £17k each a year). But I am freelance so couldn’t get a mortgage without him. Deposit comes from a lucrative contract I had a few years back + help from my parents.

DP claims not to have a preference regarding the ownership split, and honestly he really doesn’t think about money at all and has been completely disinterested in financial implications for him throughout this whole process. But I worry that if he one day does start caring about this stuff, he could resent me if I’m perceived to have been greedy.

I think the percentage split is MAYBE technically the fairest, but is still unfair to DP due to the mortgage interest user139 mentioned. Which I hadn’t thought of.

I think I was hoping situations like this were so common now there would be a ready-made solution! I can’t believe there isn’t, it must come up all the time. Just hope whatever we end up with doesn’t foster resentment from either side. That’s my main fear.

40k is in the house the other 2k is fees ( i think the 2k has to be ignored really)
40/131 is 30.5 %, call it 30% for simplicity, the other portion is 70 ie 35% each; so it is correct that a 65/35% split is reasonable

Yes, this is how family member came up with the percentage split. It makes technical sense I think but it does seem quite high on my side. I should say that the family member in question has a vested interest, since they have given me some of the money towards the deposit! It is a gift though and they wouldn’t ever (and can’t legally) ask for it back.

When DH and I bought our first flat we did a % split - his parents gave him/us a deposit which we wanted to protect.

It’s irrelevant now as we’re married, have kids etc. but it’s important to get it properly sorted at the outset.

Ah I thought 65 plus half of what was remaining so 65+32.5 which is virtually everything

But I worry that if he one day does start caring about this stuff, he could resent me if I’m perceived to have been greedy

Either you'll live happily ever after if which case it won't matter
Or
You'll get married and it won't matter
Or
You'll end up splitting up and you won't give a dog about what he thinks is fair.

We have just gone through a similar situation and had a Deed of Trust drawn up protecting our individual deposits. So I get back £AB amount if we split and he gets back £BB. If property prices fall, then we get back the PERCENTAGE of our deposits.

The way we did it - rightly or wrongly - was based on 50% ownership but the deposit paying person paying a larger chuck of the mortgage.

So in your case House purchase is £133k inc fees. 50% of this is £66.5k so each share. £91k total mortgage required.

You have £42K deposit so would need a £24.5k mortgage, your partner a £66.5k mortgage for their share. So you pay 24.5/91th or 27% of the mortgage payment each month. Your partner 73%.

Obviously it depends if this is affordable for you both.

65% (I think it should be 66%) doesn't work in the scenario where you sell almost immediately, for the same price. You'd have to give him a third of the deposit.

I would say that the first 32% (42/131) of the sale price should come back to you, then any remaining proceeds be split 50:50. Specifying 32% of the sale price instead of 42K takes care of inflation.

Another possibility that would make contributions and ownership completely 50:50 is that you make him a 21K loan for his share of the deposit. Any outstanding balance on the loan is repaid to you from sale proceeds in the same way as the mortgage, with the remainder being the equity to be split. He could pay interest-only on that loan, possibly at the mortgage interest-rate, which should be affordable.

*I am putting in all the deposit, which is £40k, plus all legal fees etc. Altogether my contribution is about £42k
So his only financial contribution will be a monthly payment of 50% of mortgage payment?

he really doesn’t think about money at all and has been completely disinterested in financial implications for him throughout this whole process
I bet he is! Afterall he's on a win-win no matter what - all the financial outlay and risk is only yours.

If you split/divorce he will benefit from any increase in equity, also if he pays towards repairs/additional works he then has an increased beneficial interest.
Tackle this like a business decision instead of an emotional one.