DP equity in house / confused

[babybrainn]

I know this probably may seem petty, but I just cant get my head around it and need 2nd + opinions :)

Me & DP have a baby on the way, the house we bought i have a lot of equity in, about 75% through cash deposit i put down.

The agreement we had is he pays the mortgage and we split bills equally. Also as we are not married we have a contract stating that any equity paid by him will be added to his share of the house.

However, when baby comes along we will be going 50/50 on sharing equity, so his salary plus my maternity pay will both contribute to mortgage therefore equity is shared from that point onwards (which the contract will reflect)

(Just like to point out i know this is all very unromantic but we are just trying to protect ourselves)

So my question is.... Dp has some savings he wants to put into the house which will count towards his equity before we have the new contract drawn up, i however, wish to take out some money, approx same amount slightly less. Essentially meaning the mortgage repayments will remain the same as its balanced out.

Does this mean, he in a roundabout way, is paying for the luxury of me taking money out, even though its the same amount going in? His logic is, the repayment would be less if i wasn't taking money out, which is true, but i am saying this way its no different so does it matter? & when i say he is paying, i mean, essentially as the year i take off for the baby my salary is basically nothing so he will be contributing more to the mortgage but we split equity.

This is probably all very confusing!!

If you are still here, thank you

I think it would make more sense if you put causal figures.
how much is the house worth, how much deposit did each of you pay, and what did you pay for the house. How big is the mortgage?

If he wants to pay say, £20k off and you want to borrow, say £15k why don’t you get him to give you 15, pay off 5 and adjust his % accordingly in the new contract?

I think he’s right, in that it doesn’t make sense to put the money in and then take it back out (via a remortgage presumably).

But are you taking the money out to afford maternity leave which is a shared expense as both your baby?

I was wondering this as well. In which case you shouldn’t sacrifice a % of equity to be able to take a reduction in salary while in Mat leave or at least I wouldn’t.

That's exactly it :)

I'm just trying to figure out if doing this will mean he is picking up the slack for me taking money out....

Oh no it's for something totally non baby related :)

From when the baby arrives you're splitting the equity 50/50 right?

what do you want to take money out for?

are you pooling your money when the baby arrives?

has the money he's accrued, been at a cost to you in any way?

From when the baby arrives you're splitting the equity 50/50 right? - Yes correct

what do you want to take money out for? - The money is going to a family member, it's nothing to do with baby or us as a family.

are you pooling your money when the baby arrives? - Yes

has the money he's accrued, been at a cost to you in any way? - No not at all, he has just been able to save a a-lot due to his salary

Technically it may affect the interest because the mortgage loan would be lower if the full amount went off so therefore the amount of interest would be lower. But if you then took a chunk out anyway, you lose that benefit IYSWIM.
Personally I’d transfer the money between the two of you and leave the mortgage alone but that’s only because I couldn’t be bothered with the paperwork required to take a chunk back out.

Paying off is reasonably easy, reclaiming equity from a lender not so much.

Also check you don’t have an early repayment penalty or a cap on how much can be paid off each tax year.

How long have you lived in the house, has it increased in value since you bought it? What does your existing contract state? If DP is paying the mortgage currently, does that mean he has some of the equity now?

The easiest way to do this if you're going to be going 50:50 from now on, would be to work out the difference between the amount you want to withdraw and the amount he wants to pay in and then just pay in the difference, while giving DP credit for the new percentage he now owns and reducing your percentage. Then get the house valued. Work out how much money in equity each of you now has. Ring fence that amount of money each. Then when the house is sold you each take out your ringfenced amount and split the rest 50:50. You could continue to work it out as percentages but it would more difficult than just working in absolute figures

If the amount each of you owns once the money has been paid in by DP and reduced by you, is broadly similar, I'd just scrap the original agreement and just go 50:50. Will there still be a big discrepancy in your shares after this?

The amount would still not be similar, my share is 75% of the house value, his deposit is say 10% and the rest is mortgaged.

The plan has always been our ring fenced amounts we keep, and the rest is split 50/50.

However, my main question is about me taking for eg 20k out, him putting 20k in, making no change in monthly repayments as its balanced, does that somehow mean that he will be paying for me to do that. As once i take it out and the baby is here, the mortgaged amount gets split 50/50.

Maybe im not explaining it properly sorry

Couple of years, yes its increased in value, yes so any capital paid off up to now will go to his share which will be ringfenced in.

You have been subsidising his mortgage rate. Now you will be subsidising his mortgage rate less.
If your equity is a huge chunk of the current value of the house (75%?) then you must have a great mortgage rate. If you hadn't put that equity in, but instead had invested it elsewhere, then the ltv rate would be higher for him ... and you
I don't see why you are messing round paying money in then taking it out again though - seems complicated (from the mortgage company's point of view that's what you are doing)

Agree with the above. If he is upset that the rate won't be as good because you're taking some out and it disadvantages him you can politely remind him how your massive 75pc helped reduce his rate and allow him to build equity in the first place.

So to answer your question you are not disadvantaging him at all.

Didnt think about it like that, good point thank you :)

I think you should own the percentage of the house that you bought. So you would own the 75% that you paid for with your deposit. Your partner will own whatever percentage of the mortgage has been paid off, e.g. if the mortgage was initially 60k, but is now £54k, he would own a tenth of the remaining 25%, e.g. 2.5%. Obviously the remaining 22.5% is owned by the bank, as it is mortgaged.

If your partner is effectively buying part of that equity, you should work out how much of the current house value he is buying, so if it equates to 4% of the current value, then you now own 71% and he owns 4% plus 2.5%, e.g. 6.5% in total.

The mortgage remains the same (as your partner is buying equity from you with no impact on the mortgage itself), but from now on any decrease in the overall mortgage is split 50/50 between you both, as you are paying the mortgage equally. NB I think he's been onto a good deal overall and your ring fenced amounts should be done by percentage not amount, as otherwise you are really being ripped off.

Why are you going to 50:50 once the baby is here?

that means you pay more? Or have I got it wrong?

Oh no i mean we are going 50/50 on the remaining balance of the house, as we are pooling money together its fair as opposed to the balance (once paid off) just going to him.