How can I protect myself financially? (Unmarried, children involved)

[Pippir]

Figures and dates rounded for simplicity!

I met DP in 2020, he had three children who are with us part-time, and I earned more. In 2022 we bought a house as tenants in common for 400k and I paid all of the 75k deposit (plus fees/costs of about 20k). We agreed a declaration of trust to say, if the house is sold, I get my 75k deposit back plus 90% of additional equity as I was to pay 90% of the mortgage payment. Property prices were rising so this felt like a decent investment for me; better than wasting money on rent.

Fast-forward to now. We have a baby in nursery, I’ve chosen to work part-time and the property value hasn’t risen at all. We now have equity of c. 100k, so if we sold today, I’d get around 97.5k and he’d get 2.5k. He’s had an inheritance of 75k which he wants to spend on an attic conversion to add a bedroom (and I agree) and we both want him to pay 50% of the mortgage, as I’m struggling to on my part-time salary.

How would you update the declaration of trust?

a) first 97.5k to me, next 2.5k to him, 50/50 of anything on top
b) first 97.5k to me, next 77.5k to him, 50/50 of anything on top
c) as we’ll both have put in 75k deposits, first 22.5k to me, next 2.5k to him, split anything else
d) something else

Complicating factors: the 75k of work won’t add 75k of value (probably half of that) but we don’t want to move. He is from a wealthy family and likely to get lots more inheritances over the next few decades. I am not and won’t. We have been going through a rough patch and doing counselling, but hope having more space would help. If we split, I’d be the primary carer of our baby and he wouldn’t pay much maintenance as he already has the three children. For these reasons, I want to protect my own finances.

I have overthought this and can’t make sense of it anymore.

Option D - Variable Equity Adjustment Clause

First £97.5k to you.
Next £2.5k to him (to preserve current equity split).
Then, credit him £75k* or whats left from the sale if sale price doesnt cover all costs
Split any further equity 50/50.

*You could argue this should be the lower value of a price increase, ie if it costs 75k but only adds 45k of value. Still, who knows what will happen to markets in 3,5 or 10 years? Today, it may have a zero effect, but in 10 years, that extra room, etc, could potentially far outweigh the 75k purchase price. IMO it wouldn't be fair to only offer the value increase at today's rates.

You could also have a sunset type clause written into this, whereby the rates decrease over a specific period of time, ie married 20 years it's 50/50, etc, that's something his solicitor may ask for.

Thank you! Is that not the same as b, ultimately?

I guess that seems fairest, but also it feels unfair that he’s paid barely anything for three years, and I’ll be paying five times that for no return for an indefinite period.

I suppose I took a gamble which didn’t pay off but he benefitted from, and now he’s taking a gamble too which both of us could lose from (him on his money, but also me as my 50% won’t be going to me, but to paying back his share, probably for a good few years). Does that make sense?

What would happen if the market crashed and there was a negative equity situation- would you end up owing more than DP? It might seem far fetched but isn’t beyond the realms of possibility. At least an ongoing 50/50 ownership would rule out you being worse off in a negative situation.

Theoretically, but I think it’s more likely that the market will stagnate than that we’d lose more 25% of the value in a crash. It'd have to go from 400k value to under 300k value for negative equity.

Protect yourself first and foremost by seeing how the relationship progresses once you're through the counselling. See if the counselling changes anything or do the old patterns of behaviour remain? As you say, you've got your baby's future to think of.

I wouldn't say now is necessarily the time to make huge changes to the financial / housing arrangement if you're having a rough patch. Doing a load of expensive, disruptive building work while you have a baby and work is just going to add more stress to your lives.

What if he invests the 75k and then uses the income from that investment to contribute more to day-to-day family finances? You say you're struggling financially, having gone part time. He is in a position to ease those struggles now. That might have an all round positive effect on your relationship and stress levels.

Save the building work for when your baby is a bit older, school age or something.

I don’t disagree, but the lack of space is a huge issue in the relationship. The plan was to do the building work over a year ago but I have been delaying because I wanted to resolve our issues first. The baby is actually 2, doesn’t sleep well and is still in our room/bed, which often means DP is sleeping on the sofa bed in his boys’ room or on the sofa if they’re here. The extra bedroom would mean DS has his own room (currently the SC’s rooms sit empty most of the time).

He wants to either commit to the building work, move, or break up.

But what do YOU want?

Have you asked local estate agents for their opinion on how much the value would increase with the work done?

Tell him you’re concerned about the financial situation of each of you, given the fact that you’re not married. Tell him that you want to go to financial mediation together so that you each know where you stand. If you can’t do this as adults and you can’t talk about money, then you really can have no secure future together.

I want to get more sleep and have fewer arguments. I want to protect my money in case we break up. I want my baby to have a bedroom.

That seems like a massive waste of time and money to be honest.

If you moved, would the 75k buy you an extra bedroom?

75k spent on a loft conversion will not add 75k of value, so accounting for that in the equity split is a non starter.

Yes, the consensus is they’d market it at 450k and expect to get offers slightly below. That’s in line with what I’ve seen sell locally. It’s not a great market at the moment.

Nothing here convinces me that you see the relationship lasting. I’d try to start with where you actually see yourself in 5/10 years time and work backwards to how you get there in the best way for you and your child.

The onset of winter isn't a good time to be starting building work, so either way you'll be in this house with no change for the next few months. Easy to say I know, but for now try to focus on the counselling and improving your relationship (or, though I hope it doesn't happen, separately or mutually seeing it can't work).

It seems slightly odd to spend £75k on home improvements that won't be regained in a house sale, unless you know you'll be there for another 20+ years. Is your current house easily sellable? If so, is it feasible to put it on the market next Spring. Then you get back your £97k and he has his £75k. Together you look for a new house with the space you need, agree an equal sum you'll both put in for a deposit (say, £70k each) and equitable share of mortgage costs, and write a new Trust deed to reflect that.

Good question.

Moving would cost circa 20k so only 55k left. I don’t want to borrow more because we are already stretched.

455k would buy an extra bedroom, but not in as nice a house. It’d mean moving from a detached house on a leafy street with a big garden and parking for three cars to a terraced house with no driveway, a courtyard instead of a garden and a smaller living space downstairs.

To get a similar house with an extra bedroom we’d need to move to another town, which would mean being further from SC (which he doesn’t want) and in rough-ish area with poor transport links and failing schools (which I don’t want).

I agree, I’ve said nothing is starting for three months due to the weather and that we need to see if we can fix things first, and he’s happy with that. Realistically with the declaration of trust, it’s more of a gamble financially for him, but building works aren’t a walk in the park for anyone and I know it’ll be stressful for us all.

I don’t think moving is a good idea for reasons listed above.

I’m exhausted.

Ideally in five years time, we’d get on, we’d be happy in this house and it’d be extended and decorated, and DS would be at the good local school.

20k, which you could argue should be protected as your initial 20k of fees and costs are protected, bundled in the 95k.

Option D is not that different from Option B; it's just missing the £2,500. Option D could also be seen as slightly biased towards your partner if it's only adding 45k value, as he's getting all his 75k investment back. But I see that as no different to the initial 20k fees being rolled into your total investment protected. Fees haven't reduced your term of mortgage or how much you pay out.

It gets messy when you're splitting things like this. What happens if he spends 10k inheritance on a new bathroom or kitchen? Do you revisit the agreement?

No one knows where they will be in 5 or 10 years; some of the most suited people I've seen get divorced, while others are still married 20 years later. Plan for tomorrow, but live for today.

The 20k is currently my loss, it’s not noted in the declaration of trust. Perhaps it should be?

To be blunt, I feel a bit ripped off as I came into the relationship with a lot of savings and they’ve all been wiped out by the drudge of raising 3-4 children in a cost of living crisis. The declaration of trust was my idea though and it just happens that it hasn’t benefitted me much. He’s not particularly financially literate and not deliberately scamming me; he’d prefer to be 50/50 on everything which might benefit me in the long run but I am very conscious that my earning potential has reduced since having our child, and if we split, I’d be in a tough place.

Other pps have answered the question about the financials on your property. I would add that as you are not married and your relationship feels rocky, DO NOT GO TO PART TIME WORK (unless you can easily whizz back up to full time). Protect your future income, your pension (v v important) and make sure he's paying equal bills, nursery fees etc

Sorry, just absorbed the fact you hint you're paying towards his kids. Go back to full time, he has to pay more for bills to cover his kids, and a higher percentage if he earns more

I’ve already gone part-time (dropped a day and can move back to full-time whenever I want) and I still earn more. My mortgage isn’t great, his is worse, but he’ll get sizeable inheritances later in life.

We currently pay 50/50 for bills and nursery.

Even if you’re not married are you partners?

you put in 95k 3 years ago and how much since then? He’s now putting in 75k. Can he pony up another 20k and pay for everything for the next 3 years (at least and longer if you’re part time) to make it even?

if you’re truely partners and if he has more inheritance coming I’d be doing everything I can to make it an equal financial partnership with open discussions about how he needs to support you more if your career is on hold. Ie household spending, your personal spending AND you pension he should be contributing to.

if you can’t have this discussion with him as adults then you absolutely need a mediator.

don’t limit this to just the house.

I’ve recently cut back a lot on paying for his kids because I realised I was spending loads on them and his spare money was going on himself. With my lower salary, nursery costs and paying for DS I had nothing left.