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Original poster

Married but uneven deposits towards house

34 replies

Monkey250 · 13/04/2023 15:35

My DH and I have been married for three years. When we were in the early stages of dating his parents bought him a house in cash (c.£250k). The condition was that he paid them back £400 a month but there was no formal paperwork (and it was more the principal than them actually needing the money). I lived with him for four years in this house and contributed to bills (paying directly to him) in that time and saved a good amount of money.

We are now married and he sold this house and now has the proceeds from it to put towards a new house with me paying c.£100k towards the deposit. We will be buying together (both on deeds/mortgage) and getting a mortgage. He (technically we as our money is joint) will continue to pay his parents back monthly alongside a mortgage but again, there is no legal paperwork.

I am just confused on where we stand on ownership of the house and if there is anything I should be aware of with him bringing much much to the table financially. If we split, presumably I wouldn’t be entitled to half of the house as there is a loan involved? We will probably have children if we can. Is there anything I need to consider with a loan being involved in this way?

I should add that I love him a lot and don’t intend to split at all but also want to be assured that I have considered any implications of buying together in this situation. Any advice appreciated.

OP posts:
ClaudiaCustard · 13/04/2023 16:18

Well you need to see a solicitor but the thing with his parents is odd. They bought him a house for 250k. When does this token £400 a month end? Is it for life?

He needs to speak to them as well I think because you're right to be cautious. You need it all drawing up with a solicitor

Original poster
Monkey250 · 13/04/2023 16:33

Thanks for the response. His parents have a lot of money so bought him a property with some of it. There was never an agreement about when the £400 would end. I suppose he has (maybe naively) assumed that one day they will just stop wanting it back because they are very wealthy, but there is no agreement in writing.

I am glad that I am right to be cautious. I do think this all needs better future proofing!

OP posts:
ClaudiaCustard · 13/04/2023 16:55

I think I'd actually approach them first. Doesn't have to be confrontational but now he's married, considering a family etc etc - of course he (and you) needs to know when this arbitrary £400 repayment might come to an end

And once you have an answer to that question, it's one less thing off the 'to do' list

I lent my DD 100K so she could buy a property aged 23. She got a mortgage for the rest. I was clear in when I would take my 100K back and there's no never ending repayment schedule. So definitely talk to them as a first port of call

SleepingStandingUp · 13/04/2023 16:58

How long has he been paying? What's 250k - 400*X? How much did he get for the house?
I think he should look at offering them a lump sum back to clear the debt, pointing out that paying 400+mortgage is a lot

Soontobe60 · 13/04/2023 17:15

Wouldn’t it make more sense for him to pay back the loan now the house is sold, and then start again? If youre each contributing the same amount for the deposit then you’ll own it equally. But if you contributed a greater %, you could own the property as tenants in common in that %.

onlyk · 13/04/2023 17:26

As a poster said above pay the parents back from the sale of the house and then move forward from there.

if they wanted to gift your husband an amount now would be the time to do it. But don’t be surprised if they thought the arrangement they had with your husband was better for him than just renting (assuming the house increased in value plus what he paid back he’ll still have a decent deposit).

SeulementUneFois · 13/04/2023 17:32

Surely even assuming 0% interest, 400 per month times 12 months is 4,800 per year.
Even if we generously 😁(for ease) rounded that up to 5,000 per year, this would need to be paid for 50 years to repay the 250k. Again this is at 0% interest, as it's family...
So I'm not sure what ground you'd have asking his parents 'when does he have to stop paying the 400 per month'?

prh47bridge · 13/04/2023 17:33

In divorce, the equity in the house (i.e. the value of the house less the outstanding mortgage) will go into the pot along with all other assets (pensions, bank accounts, etc.). As you and your husband are making regular payments to his parents, the courts are likely to regard the money they provided as a loan, in which case the outstanding amount will be deducted from the assets. Whatever is left is divided between you. If, however, the courts decide the money from his parents was a gift, it won't be deducted from the assets.

Having some paperwork in place for the loan makes it more likely the courts will treat it as a loan rather than a gift. Looking at it purely in financial terms, you don't want this. If it is treated as a gift, there will be more to split between you so you will end up with more if you divorce. Your husband, on the other hand, will do better if it is treated as a loan.

Note that whether the house is owned as joint tenants or tenants in common makes no difference in divorce. You could own the property as tenants in common with a deed of trust setting out how much of the property you each own, but that is not binding on the courts.

Original poster
Monkey250 · 13/04/2023 20:31

That’s right. It’s the principle of being paid back rather than the money itself. I am just trying to figure out if there is anything else I need to be considering here regarding this loan to safeguard the future given its a loan related to a time when we were not married.

OP posts:
Original poster
Monkey250 · 13/04/2023 20:32

@SeulementUneFois

OP posts:
Mumof3confused · 14/04/2023 16:44

You might want to see a solicitor and get a post-nup written up. That would protect both of you, as well as his parents in case of divorce. And you would avoid a potentially lengthy and expensive legal battle.

If you were to separate, and in the absence of any loan agreement, it’s likely the court would just split it 50:50 but that depends on lots of factors - earning capacity, any children etc. The court would see his family investment as a gift.

Also, if they decided to write a loan agreement at this stage re your new house, you’d still want a post-nup protecting your investment. Otherwise you may be faced with none of his share but having to give up 50% of your contribution.

prh47bridge · 14/04/2023 20:14

Mumof3confused · 14/04/2023 16:44

You might want to see a solicitor and get a post-nup written up. That would protect both of you, as well as his parents in case of divorce. And you would avoid a potentially lengthy and expensive legal battle.

If you were to separate, and in the absence of any loan agreement, it’s likely the court would just split it 50:50 but that depends on lots of factors - earning capacity, any children etc. The court would see his family investment as a gift.

Also, if they decided to write a loan agreement at this stage re your new house, you’d still want a post-nup protecting your investment. Otherwise you may be faced with none of his share but having to give up 50% of your contribution.

I am not convinced the court would see his family investment as a gift since regular payments are being made, which indicates it is a loan. Of course, OP will be better off if the courts did treat it as a gift.

Mumof3confused · 14/04/2023 21:35

You’re right but it’s a very grey area and if they saw that as a loan but the Op’s contribution to be split equally that’s not great either. Just think it’s better to get it all in writing so you know where you stand.

ArcticSkewer · 14/04/2023 21:39

If they are rich I would be suspicious that this is deliberate on their part so that if you divorce, paperwork can be produced to show that £250k is in fact theirs, not his.

Kind of clever! I like it as an idea.

Inca22 · 14/04/2023 21:51

When I consulted a solicitor, I was told a post nup also isn't legally binding.

prh47bridge · 14/04/2023 22:08

It isn't but, if it is done properly, the courts will follow it unless it would be unfair to do so.

Mumof3confused · 14/04/2023 23:09

@ArcticSkewer But they could just have written a loan agreement.

@Inca22 when done properly with both parties having taken independent legal advice, these have quite a lot of weight in court nowadays. Of course a ‘needs’ based argument might still trump the pre-nup but I’d say well worth doing. I wish I had…

ArcticSkewer · 14/04/2023 23:17

without paperwork though it can also be a gift ... so for IHT purposes after 7 years it would fall outside the estate

Yet can transform into an official loan with backdated paperwork should a divorce be on the cards

Original poster
Monkey250 · 15/04/2023 00:39

ArcticSkewer · 14/04/2023 21:39

If they are rich I would be suspicious that this is deliberate on their part so that if you divorce, paperwork can be produced to show that £250k is in fact theirs, not his.

Kind of clever! I like it as an idea.

I think I agree with this which is why talking to them is difficult. I don’t know how I feel about a post nup and know DH wouldn’t agree given we are both very happily married. I might probably be worse off going down this route too given he has savings too which we view as our money but hasn’t all been saved during the marriage.

OP posts:
ArcticSkewer · 15/04/2023 06:31

If I gave my son £250k I wouldn't want to see half of it disappear in a divorce.
It's difficult.

What exactly would you hope a post nup would achieve? What would you want on it?

After his parents have died, the 'debt' would no longer exist in any case, so if you were married for a long time then it would be absorbed into the marriage, as would your own inheritance if you put it into the house

I guess right now he has a £200k+ debt that allows you both to live in a bigger house. You could downsize and pay his parents back if you wanted to free up the £400 a month (or remortgage if you can borrow that much).

tribpot · 15/04/2023 06:36

He has sold the house his parents bought for him, did he not offer to pay them back out of the proceeds? The 400/month suggests they kind of want the money back. I also couldn't live with that over my head, thinking this loan might be called in at any time. I'd suggest he force the issue by offering to pay them back in full.

Lcb123 · 15/04/2023 06:59

I’d personally have a few broader concerns - the solicitor wil want to know source of deposit funds, so depends how honest you are about the deposit technically being a loan although not formal. Otherwise you can say it’s a gift but then likely his parents would have to write a letter or sign a form confirming this.
it also depends if you declare this as a credit commitment on your mortgage application- potentially could be picked up if they look at your bank statements
If I were you I’d want to repay them in full now just so it’s done. Even if it means you have higher mortgage payments

BendingSpoons · 15/04/2023 07:01

When I have bought property before, any deposit money had to be gifted. My parents gave my brother some money and had to sign a letter that it was a gift. If it is a loan, then the bank reduce how much they will lend you. They probably haven't asked questions as it appears to be proceeds from a house sale, but I would be careful about formalising the loan and making it tricky with the mortgage company. That said, how much is your mortgage? Is it affordable alongside the £400? As that is precisely why banks don't like you having further loans, as ot affects affordability.

ArcticSkewer · 15/04/2023 07:04

The repayment schedule is pretty easy to work out btw

If he is repaying £400 a month, then every year he repays £4800. Assuming no interest (and there's no paperwork so I would assume no interest) ... So in 10 years he will have repaid £48 000. If you do divorce it shouldn't be hard to work out how much is due. Meanwhile he, and you, benefit from the increase in value of the asset. In a divorce you would put all your assets together, take away all the debts, then maybe 50:50 what's left. You are not disadvantaged by this.

Mindymomo · 15/04/2023 07:11

You say they bought him a house, not lent him the money. Was the house in his name or theirs. If theirs he was basically paying rent. If it was his house, then he us paying back a loan. He needs something in writing either way, doesn’t have to be done through Solicitor but something signed by them on paper.

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