Help with housebuying legal ownership and percentages and maths!

[justformodesty]

not rocket science if you follow the housey threads and i guess my style of writing is a bit of a giveaway ? but it seems a bit crass to write this in my own name.

I have 170 thousand as a deposit on a house. It is an inheritance. I want to be fair to dh if we should split. I don?t want to get a better deal. In this light then can you work out the fairness in this mathematical problem.
We are buying for 245,000. I have a 170,000 deposit . This deposit is ringfenced by whatever (legalese) should we get divorced.
i want the 170,000 back plus interest ? so i guess that this should be worked out as a percentage Of the 250,000 then in say 10 years if we get divorced the 170000 will be worth this in relative termd ? are you with me? but this migh tnot be right or fair or indeed the best way!

Dh has nothing to contribute initially financially however he will be paying half the remaining mortgage / upkeep of the house, maintenance etc.

Now in my head i see the mortgage/equity as a seperate sum which is divided in half. The equity/profit should be split right down the middle and this does not include my contribution in percentage or relative terms. Still with me? Well done.
What doesn?t seem fair is if we lump the initial investment together with my share of mortgage ? say that is 85% on total ? this means that i get 85% share of total equity. Whilst dh gets 15% but pays half of maintenance etc. I will get more equity becuase i have a greater total share and he will get less. The equity after the 170,000 should be split equally. Can anyone have a stab at putting this more simply ? does anyone know WTF i am talking about? or have i just gotten myself in knots.

Obviously dh and i have talked this over. he is 'irked' i am taking thisegal step but he knows why.

the problem is

if i get 85 and he gets 15

but we each are jointly resptnsibly for repairs and maintenance - money is in one pot, so we wont be diviing this cost by 85% i pay to 15% dh pays for a new boiler

sooooooooo - it cant be fair then can it as dh is paying half for the upkeep but only getting 15%

then what is the point of he law?

I know what you mean - I think.

If you just invested your £170K in some kind of high-interest account, and bought a house for £75K as well (I know that's impossible but anyway) and shared all the costs between you, and then in due course you sold the house for however much it had gone up to, you would receive equal shares in the house but your £170K plus interest would still be yours.

So if that's what you want the outcome to be, you just (just ) need someone to work out, at this hypothetical future date (if things do go pear-shaped and you have to sell and split the money) what your £170K would be worth at that point if you'd invested it, and deduct that from the proceeds of the sale.

Does that help?

(Probably not )

But he'll get half if you divorce anyway

Justy

Do the maths again

It can be and it is fair

You are not thinking logically

You have just paid for 85% of the house

He has paid for 15%

In fact he may even in fairness get less

Because having a whopping deposit does get you a better mortgage rate

But you are being fair - he just hasn't got any money, right?

The point of the law is to make lawyers rich

You pay them to draw up the agreement

then you pay them to do the divorce

Then DH pays them to challenge the agreement

Then you pay them to protect your money

No-one wins except the lawyers

Sorry maybe I'm being cynical

Would he though? They changed the law recently - there was a big legal precedent thing which said they no longer start at an assumption of a 50-50 split on divorce. (This was based on a family where one of them had put a lot more in at the start)

right - yes. i suppose your right. it is fair.

thank you so much

I can only apologise for my lack of brians

Brians aren't necessary for this

BTW this is only relevant in shorter marriages

You wouldn't get anyone (any judge) agreeing this split in a longer marriage.

Yes only the lawyers get rich in divorce - that's a truism

OK I'm not actually sure you can do this if you're married becuase the law sees everythign as 50:50 anyway so that'd be the first thing to check out.

What I'd do is consider that you are putting 170K in and want the equivalent in real terms out

so house costs 245K
your deposit is 170K
your mortgage will be 75K

I would say that you take your 170K and times it by the annual rate of inflation which runs at 2% - 3% (say 3% for ease)

so split up year 1 and you get back 170K + 3% (so times initial sum by 1.03)= 175,100
year 2 = 175,100 + 3% = 180,353
year 3 = 185,763
year 4 = 191,336
year 5 = 197,076
6 = 202,988
7 = 209,078
8 = 215,350
9 = 221,811
10 = 228,465

then split the remaining 50:50

but tbh this basically relies on the house market increasing .. what if it falls?

it is very complicated .. and I'm not altogether certain it will stand up in court (I also put a hefty sum into our present house .. but I don't expect I'll get anything but a fair divorce settlement)

you could actually get a better rate of return by just whacking it in a bank .. but the benefit is you both have a house to call home .. so maybe there is a certain fairness in it?

I think that inheritances are yours and yours alone as long as you dont convert them into 'matrimonial' property. As soon as you do that then you are liable for everything to be taken into account upon divorce, although I do think that the courts look at all circs when deciding who gets what.....

Thanks Twig. i think the key word you have brought up is 'inflation'

i am going to ring the soliciors now

Someone is going to ring me back.

is that 3% year on year? so the total of year one is inheritance +3% inflation
year two inheritance +inflation from previous year total + inflation from year two ....and on.

so is this termed cumilative - or is that the wrong term?

yes that's right and it is termed cumulative

at the moment inflation is I believe at 2.1%

the reason to peg it to inflation is that you get the same 'in real terms' out as you put in but you're not actually making money on it (ie it's not like an interest bearing account) .. you could get much higher interest in a bank's savings account

yes that seems fair to me- that should we split dh and i have made the same amount of money out of the property.

It used to be called compound interest - where you get interest on the interest - otherwise it's simple interest (on the capital only)

Twig and Justy

You don't need to work out anything complicated like this in terms of indexing the original price and linking it to inflation. Inflation is probably the wrong index to link it to in any event, because you need to take into account house price inflation (or in fact deflation).

If you work on the percentages set out originally, that automatically takes into account the rise (or fall) in the property value.

quattro you may well be right ... I was trying to divorce it from the housing market really and just make it 'this much money in, this much out'

Houses can and do fall in value though so it is a difficult one.twigletts calculations look right to me.

This thread has really got me thinking.My dp had a 13k inheritance when ds was 2 and we bought a flat for 42k.So theoretically he should have 13/42 of the value but we didn't bother and I asked him about this just now and he says its all joint and no provision was made for that money as 'we are in this together'(his words).But yours is a bigger amount and a huge percentage of teh price and you need to protect it