Buying a house with different deposits

[Nopok]

My partner and I are buying a house together. We have different deposits. As I understand a joint tenancy is when we both put in equal amounts and share the house 50/50. If we put in different amounts we will have a tenancy in common.

This seems quite straight forward. However what happens if we begin with a joint tenancy but we renovate the house using only one of our savings? Would it be wise to draw up a legal document at the end of this process to show whose % in the house has increased? I imagine this will be complex as work required may span over a year or two so at which point would we need an additional legal document? If anything were to happen in the future (splitting up) would a later legal document be valid and be accurate in determining who owns each % in house? Thank you.

It depends how you're going to split it if you sold. If one puts in 60% of the deposit, does that mean they'll be entitled to 60% of the equity going forward? Or will the equity always be 50:50?

You can be joint tenants with ring fenced deposits, as far as I know.

You would need a further agreement, superseding the original, to ring fence a higher amount if one of you invested further money into the house.

Thank you. With different deposits initially we will both then be contributing to the mortgage equally so if sold the equity would be 50/50. But this would also need to take into account the cost of renovation work for one of us. For the further agreement would this be costly? Could a solicitor easily add this to the initial agreement?

Alternatively only one of us contributes to the initial deposit, both 50/50 to mortgage and then both 50/50 for the renovations. In which case we would not need a later legal document. Would there be any benefits/hindrances to either scenario?

My husband I don’t own our properties the more common way (Joint Tenants) as we have our wills set up in such a way that having them as tenancies in common works for us.

As tenants in common you can put in unequal deposits but still own 50/50. I earn far more than my husband but we’ve always owned everything 50/50 - I also pay more of mortgage. Owning more as I put in more just wouldn’t seem right to me. My parents weren’t to happy but it wasn’t their money.

for us the reason of doing it as tenants in common was for inheritance and for tax (BTL tax is easier to apportion) not for the percentage owned..

My nephew bought a flat with his girlfriend and they put a charge or something similar on the property for the sum she got gifted by grandparents so that it would go back to the grandparents if they split so if it is important to you to identify who has put in what then there may be other mechanisms.

a whole other thread but I would question if you are so worried about percentages and contributions how long term is the relationship, in my experience a relationship isn’t about the money but how you each contribute in different ways.

@PettsWoodParadise I'm not worried about us splitting up. But I am concerned because our deposits are noticeably different and we both have children so need to protect their inheritances too.

@Nopok that makes sense, I am just concerned about any arguments you might have in the future which clearly you are trying to prevent and so apologies if it came across me probing too much, that wasn't the intention, I would want to protect my child's inheritance too which is why the Tenants in Common as you've found it a good way forward and wish you all the best in your purchase.

A good solicitor should be able to give you options as part of the process about how to protect your various contributions or loop in a wealth management, inheritance specialist or other colleague. Some conveyancers though are very process driven so may not see the wider options.

Hopefully you get some good answers on here to help you.

Even if you contribute and or own identical amounts, in your situation, as parents of non-shared children, I would buy as tenants in common rather than joint tenants.

As tenants in common you can each leave your share directly to your children.

You then have the option in your will to leave a life interest in the house to the surviving spouse, enabling them to stay in the house until they die or cohabit or remarry, for example, at which point the children gain their inheritance.

As joint tenants when one dies the whole ownership automatically reverts to the surviving partner. Your respective kids are then vulnerable to the Will of the survivor.

Two of my friends saw their widowed Dad marry younger women, put all the money into a shared house with her, only to die, and then years later receive nothing from the second wive’s Will.

Your solicitor can draw up a deed showing % of ownership: for example if on a £200k house one of you puts in 70k deposit, the other £30k and you pay for the £100k mortgage 50/50 then one owns 60% and one 40% once all the mortgage is paid off.

OR state the amount of deposit each pays and say that on sale each reclaims their deposit at the value it now represents. So if you put in £50k deposit and the house / equity at point of sale, doubles in value, then you get £100k back as deposit, and your partner’s deposit is increased by the same value, and you then split the equity, if you paid the mortgage between you.

If your deposits are of very different value, I would be wary of simply ringfencing the cash value. I say this from bitter experience.

I did that with a deposit of nearly £150k against my DP’s £25k. By the time we sold the house had doubled in value, I got my £150k back before the rest was divided, and he got his£25k, but he benefitted from half of the increase in value if that £150k.

If we put in different amounts we will have a tenancy in common.

You can choose between joint and in common, generally depending on what you want to have happy to your estate. If you want your 'partner' to inherit the whole house, then do joint.

If you want to be able to leave your part in your will, choose in common, and specify the percentage owned by each party.

When we first bought, we just wrote one side of A4 which set out who had contributed what deposit and our agreement of what would happen in the event of us (a) splitting up and (b) dying. When we split, we implemented that agreement.

Not married, so no divorce required.

For the record, we agreed that the deposit(s) would be returned and then the equity split in the proportion that we paid the mortgage.

We shared costs in proportion to our incomes.

Thank you @PettsWoodParadise @SuperCamp @FinallyHere really helpful advice. Unfortunately, I've also had some bad experience in the past and so keen to get this agreement "right" especially as children are involved and our deposits are significantly different. It seems that tenants in common would be most suitable for our situation.

In the worst case scenario of one of us dying for example, it is difficult to know when the surviving partner should sell/when children should get inheritance and how much etc. Obviously I want to protect my children but also my partner too so I will need to look into this further. I guess life insurance would offer some protection to my partner? @SuperCamp you make a good point - when partner dies/cohabits/remarries etc. I'm wondering though if children would need if before this - for example university fees and what would happen in this situation. Of course this is only in the event of death so hopefully that won't happen but would rather be prepared anyway.

The other thing is we may start out as contributing equally but the renovations on our house will only come from one of us, so I'm guessing we could still start with tenants in common (even if contributing equally at first) and then this could be updated later to include any further work done to house and a recalculation of percentages etc?

If anyone does have any other personal experience please do let me know. I have not been in this situation before and have seen families arguing over wills etc so am keen to put in place something reasonable and fair for everyone involved, if that's possible.

I would def do tenants in common, you can divide the ownership up how you like, either each get back what you put in as cash initially then divide any profit 50:50 or in unequal shares, or do a 60:40 split or whatever you like. Renovations or investing in the house in other ways e.g. paying off the mortgage won't automatically change this even if they were funded solely by one person so if you want to 'protect' or 'ring-fence' that money you'll have to change your ownership split after the renovations by getting your solicitor to amend your deed of trust although this may be an extra expense.

Wrt to wills personally I think it's fair to leave your partner at least a life interest and/or right to reside in the house in the event of your death (and vice versa), you can state this ends if he remarries although that wouldn't stop him partnering up without marrying I suppose. And it would mean your share wasn't available to him in the event of it being needed to pay care costs, you might view this as a good or bad thing I guess. Either way I wouldn't rely solely on your capital in the house for helping out with the costs of raising children and uni costs, a house is not a great asset for this as it's illiquid, meaning obviously if you leave your 2 DC £200k divided equally, each can access their money when they need to, but if you leave them 50% of a house worth £400k, when DC1 needs that money the only realistic way they can get it is by selling the house with all the attendant hassle and fees, even if their father and younger sibling are still living there - if it is sold and then property prices rise in the next 2 years, DC2 might quite rightly feel quite peeved that not only were they made homeless their share would also have been worth a lot more had the house been kept, etc. So until they finish higher education I would have really good life and critical illness cover to cover the costs of getting them there (unless finances prohibit of course). All or some of the money from the policies can be left in trust for your DCs (DH can be a trustee for yours and you for his, and you can name a neutral third party too to ensure fairness), this way you can be assured it will be spent on them not on a second wife or stepchildren or whatever. Once they're grown up you can review of course and I'd recommend redoing your wills with greater thought to care and estate planning than arrangements for bringing them up and concerns about 2nd marriages (although later in life marriages do happen of course).

My son put 35,000 pounds down as a deposit on a house. His girlfriend put nothing. She wanted to move into a house with a garden. She promised if anything happen she would give back the 35000 to him. She didn't do any house chores, cleaning, cooking or anything, obviously due to that they split up. Now she isn't giving back the money and taking half and there is nothing we can do.