A money one - who is being unreasonable?

[AnnaQuayInTheUk]

A family member, let's call him Josh, and his girlfriend, Sophie, have been together for 5 years. Three years ago they bought a house together. Josh had inherited some money so put down the deposit of £30k, Sophie didn't have any money so didn't put down anything.

The house They loved was £210k so they used Josh's inheritance as a deposit and took out a joint mortgage of £180k. All good.

However, they have now split up. They've had 3 house valuations, and have realised that the house has gone down in value. On the advice of the EA, they are putting it on the market at £189k but have agreed that they will accept £180k for a quick sale.

The issue is this. Assuming the worst case scenario that the house sells for £180k, should Josh accept he's lost his inheritance and suck it up, or should Sophie pay Josh £15k as her "share" of the loss?

AIBU - Josh should suck it up
YANBU - Sophie should pay Josh £15k

They are both aware that the house might not sell at all!

Sorry this may have already been asked. Can Josh afford the mortgage on his own? Perhaps by renting out a room to help make up the short fall.

Because if the house sells for 180 that is the same amount as the mortgage (this early on they won't have paid of much of the capital it will have nearly all be interest) so Sophie isn't going to receive any money from this sale to put towards a future purchase.
So could Josh release Sophie from the mortgage and have the property solely in his name? (That way the deposit etc is still with the house)

If the sale is forced through and if the initial £30k all went on the deposit (and not on fees) then on a £210k house that's 1/7th of the initial value so Josh should be pushing for 1/7th of the sale value. Now I doubt Sophie has £25k and a bit kicking around or it would have been used in the initial purchase. At the moment Sophie is getting nothing out of the sale (because the house has gone down in value) but she put nothing in. Josh is also getting nothing out of the sale but he put £30k in. That doesn't seem very fair to me.
Don't sell.

Agree with this. His investment has declined in value so he shouldn’t get all of his original £30k back, but morally he should get his deposit back, minus the % decline in value of the house. Then split the remaining difference equally, as you would have in the usual situation of the house appreciating in value.

I think Josh should get his deposit back out.
And 50% each on the rest.
I'm sorry it's gone down in value, that's totally shit.
Sophie can suck it up by the sounds of it, she will have benefited from being an owner occupier which wouldn't have been possible without Josh's deposit.

Wow Sophie moves on quickly! You would think she might be a bit more cautious about jumping straight into a property purchase with a partner now, having experienced that things don’t always work out.

I think he should get back his £30,000 and then whatever is left is split between them

If the house had appreciated by £30k I assume she’d expect half of the gain upon sale?

So she also foots the loss at 50%

Morally Josh should get his deposit back.

When I bought a house with my ex, he put a much larger amount into the deposit than I did, because he had more savings. No kids involved. When we split up and sold the house, I could have taken 50%. But I didn’t because that wouldn’t have been fair. We each took out what we’d put in, then split the rest between us equally.

Sophie could just leave and forget it really, she paid towards the place but less than if she was renting. It does seem mad to lose money on it. Is the market that shite, or is there something about the house? As pp said he could take on a lodger and wait till he at least breaks even on the sale?

He should have had it in writing what would happen if they split. I would rent the house out until they can get some of the money back.

It would be interesting to know more on the day to day. Who paid the bills, the groceries, holidays, who did the housework, did they buy a car together etc. if all paid for by Josh including the mortgage, then I think he should get it all.

I don't get some of the previous comments. I think some PPs must think that they've paid off their mortgage in 3 years?

In this instance, he's paid 30k deposit and it looks like there was no agreement. The house has lost money to the tune of 30k, yes?

The only answer here is that Josh buys her out - there is literally no equity and so offers zero. So Josh is just taking Sophie off the mortgage and going his own way surely?

Am I missing something?

If they've only had their mortgage for 3 years they will be paying front-loaded interest. With the value of the house decreasing by so much, there can't be any equity. Unless they've been overpaying by thousands each month, which you haven't alluded to. Sophie is entitled to nothing.

If she digs her heels in to sell the house, then she is liable for half the loss incurred.

@AnnaQuayInTheUk Is Sophie expected to take the loss and give Josh an additional $30k so he doesn’t lose his money? Because even if that money was ring fenced he wouldn’t get it back if there was a loss?

From my piont of view, even with the inheritance, of the 210k, Josh contributed 4/7 [four-sevenths] of the property investment.

Therefore, when it sells, at whatever price, Josh should get four-sevenths of the eventual pool of money.

Too easy!

Percentages and fractions only matter if splitting the equity. As there is no equity, it is all pointless. No one will get any money from selling the house as there will be no money. The sale from the house will pay off the mortgage and that's that.

The bank will have contributed most of it so will be getting their money back and Josh and Sophie will be lucky to get loose change if the value has gone down.

This.

Understandable, yes, but I fear that that kind of delicacy is one of the many things Josh will not be able to afford for the foreseeable future.

I think Josh will have to eat this one unfortunately. They won't gain anything from house sell so he "lost" his money due to the market.

If they were 'tenants in common' and there was equity, Josh would get more out the sale. If they were 'joint tenants' they walk away with the same regardless.

Myself and XHB were joint tenants and got married after we bought the house. We divorced and I bought him out. The fact his inheritance paid the deposit did not come into it. I did not have to return his deposit money.

Let's say my XHBs deposit was 10k for a 100k house.

Let's say we had paid off another 10k whilst living there. So 20k total, owing 80k.

Let's say our house was valued at 110k. So £10k equity (in this situation of course there is no equity).

He felt he deserved 20k to be bought out by me, as I didn't contribute to the deposit.

(110-80 = 30k. Minus 'his' 10k deposit (to be returned to him) = 20k. 20/2 = 10k. 10 + his original 10 = 20.)

In actuality he got 15k.

You go in as a joint tenant, this is the risk you take.

My XH could not afford the mortgage alone, so even though his money provided the deposit he could not have afforded to live there without me. So I feel no guilt.

There isnt anything left - the house has lost value.

In this scenario 180k is remaining on the mortgage. They can sell for 180k. Leaving £0. £0/2 is still zero. They will both walk away with nothing, and Sophie owes Josh nothing.

Depending on why this house has dropped in value it may be worth hanging onto it longer to see if it could rise in value and putting it out to let in the interim, with both remaining joint owners. Risky, as if it continues to lose value they could end up in no better a position and take forever to sell.

Josh isn't entitled to have Sophie pay him anything - even if they were tenants in common he would only be entitled to more of the proceeds of the sale, and in this case there are no proceeds.

Well once she gives Josh his money back ( id ask for all despot with the deducted decrease )
Then Sophie can get the house sale she wants .