Partner disputes mortgage profit split

[olivia12]

Hello, I would like some advice regarding my tenants in common joint house purchase. My partner and I bought a property 6 years ago. He paid 100K deposit, I paid 5K deposit.

All mortgage payments/bills/maintenance are split 50/50.
We agreed to sign a deed of trust that in the event of us selling the house before our mortgage is paid off, we would each get our deposit back, pay the remaining mortgage, and any profits would be split 50/50.

He was happy with this at the time, but for the past two years he occasionally brings it up, saying it’s unfair and he should get more profit in case we split.

I know legally he has agreed and signed the trust, but the fact he keeps bringing it up at every argument, and feels very resentful, it’s starting to affect our relationship. If he had wanted a proportional split, I think our mortgage payments should have reflected this, but I’ve always paid 50/50.

I have been to a solicitor that also agrees with me, but I am not sure that my partner will ever see it that way, even though at first he did!

Any advice? Should this be in the relationship forum?

Thank you

It's a totally normal way to go about things. It does favour you, but it also protects him if the property value falls. If he mentions it again, maybe tell him you're sick of hearing it and to crack on and get the house sold and assets divided. He's a nasty prick.

The point is most people don’t have the self-discipline to save. It probably works out about the same if you rent and put the capital into an Isa but people would dip into it.
See endowment mortgages
Enforced savings in shape of a mortgage means they’ve got something to show for their working life at the end of it

He’s been a bit foolish buying a house with someone who has so little to contribute to the deposit, and he’s probably realised that. If you had put down 50k each, then his other 50k could be making money in investments. I wouldn’t have done this if were him.

How does the 2nd part of this sentence follow from the 1st. If house prices may fall, then those without a big deposit are going to get stuck in negative equity and may end up worse off, whereas those who have a big enough deposit will keep the value of their debt lower than the value of the house and will still be better off than they would have been if renting.

Nasty. And doesn't acknowledge that as house prices are falling, he will still get his deposit back. If he'd bought on his own and needed to sell, he may have lost it.

In any case, if two people decide to set up home together and one of them is motivated not to be out of pocket by a penny, the relationship is doomed.

He was find with the agreement when you bought the house as when he bought the house he planned to stay with you long term, so he could be generous, particularly as it would mean you paid 50% of bills so his day to day life would be better.

But now he’s changed his mind. He’s no longer happy with the arrangement because while he’s not ready to leave you yet, he has no intention of staying with you long term.

Make any plans, generous or not, based on the understanding the only way this man is still with you at retirement, it’ll be because he failed to find a replacement, not because he didn’t go looking.

I would definitely be putting a hold on any such plans at the moment, should that inheritance happen soon.

It really sounds like he is not happy in the relationship, and/or generally depressed.
If I were you I would be considering whether this is a man I want to be staying with...

This. He signed the agreement and unless you held a gun to his head it was his own choice. I'd not tolerate him constantly bringing it up. I'd split up, divide as in agreement he signed and find somewhere else to live.

Why is it nasty? Just plain common sense. 100k is hardly a penny! It’s a huge amount of money, especially in the current economy.

I can see what he means in that the value of his deposit is frozen even though (presumably) part of the increased equity will arise from the deposits as well as any paid off share of mortgage.

So say the purchase value was 500k.
He paid in 100k so his initial share of equity was 20%.
You paid in 5k so your initial share of equity was 1%.
Say in 25 years the 400k mortgage is paid off 50/50 but the house is worth £1M.

If the equity shares above had been followed he would get 200k back for his 20% deposit.
You would get back 10k for your 5% deposit.
You'd then split the remaining 790k (395k each).
He gets 595k (59.5%), you get 405k (40.5%).

But in the current agreement he would get back 100k + 447.5k = £547,500 (54.8%).
You would get 5k + 447.5k = £452,500 (45.2%).
My maths is shocking and probably not right but you see what I mean. The more the value of the house rises the more he loses of the 20% has frozen.

But the silly twerp signed up for it so the time to object has long passed. The agreement could have been calculated differently but it wasn't.

I don't think the arrangement you have is unfair, its the same I had for a long time and I was the one with the substantial deposit. But if you are minded to change the profit share then you also need to think about improvements around the house. So no 50/50 split on replacing the boiler for example - if he wants the benefits of a higher split he also can't have the benefit of splitting household expenses 50/50. If I was you though I would not agree to any changes.

Not gonna lie I would be mad too but hey this scenario is why I own 90% of the house.

Honestly the right thing to do is to split profit proportionally, the only reason you own a property now is because of him after all. You can amend a tenants in common at anytime but we all know you aren't going to do that because you don't have to and won't benefit from it.

I agree - it means the OP gets more return on her money than he does, which isn't fair, so I see his point. But that should have been addressed at the time.

And to PPs saying "deposits don't count" - they very much do, it's the total amount you have invested that counts, whether that's from deposits or mortgage, doesn't matter.

From an earlier reply of OP, while DP’s deposit was much larger (100k v 5k), OP has paid 100% of the mortgage costs since purchase.

Which makes a difference.

So if he wants to be fair about getting back what each put in, you need to calculate it in the basis of what you have ACTUALLY put in.

DP: 100k + 0
OP: 5k + (monthly payment A) x (number of months paid)
Once you pay off outstanding mortgage, you could either:
Each get your costs back then split the profit
or
Divide the entire remaining amount in the percentage of overall contributions paid (deposit + monthly payments to date)

No I didn't think she has - they've split the mortgage 50/50

He should get a lot more than you. If you’d invested £5k and him £100k in similar savings accounts he would have earned a lot more interest even at the same percentage.
Money invested in a house is the same thing.

You agreed what you agreed, I dont think its fair for him to change his mind 6 years in. Property could have crashed instead, the flat could have had a cladding issue, would he be so willing to take on more of the liabilities or losses?

But honestly at the end of the day, its sounds like its over. Id draw a line under it, sell and move on. He gets a his £100k back and healthy profit, yes probably about £23k less than he could have had if it had been structured differently, but again thats only certain retrospectively.

Here the numbers from AI if they interest you, but honestly why give away money - you had a deal, hes behaving like someone he has a deal with not a partner, so reflect that to him and stick with your legal agreement. Frankly getting a new one will not be worth the hassle when thats his frame of mind anyway.

Current deal his share: £100K + £82.5K = £182,500
Contribution-proportional split: 77% of £270K = £207,900

Current deal her share: £5K + £82.5K = £87,500
Contribution-proportional split: 23% of £270K = £62,100

Property could have crashed instead, the flat could have had a cladding issue, would he be so willing to take on more of the liabilities or losses?

A few people have made a similar point to this. Am I being really thick - I don't understand it. If the value of the house crashed then he would have suffered a much greater loss. If it went into negative equity then he's lost 100k and OP has only lost 5k.

Someone else said this -

And doesn't acknowledge that as house prices are falling, he will still get his deposit back. If he'd bought on his own and needed to sell, he may have lost it.

How on earth does their set up mean his deposit is any more protected than if he'd bought on his own?

It doesn't. I don't understand how any one thinks he's getting a better deal.
And a PP said that repairs should not be 50/50 if he wants the benefit of more profit - he gets more profit (if there is any) because he put more money in, and now you're saying he should pay even more? It doesn't make sense.

You really don't understand. If they bought the house for £400k and it dropped in price to £350, he'd get his £100k back first, OP gets her £5k back, and they split any remaining equity equally when the mortgage is paid off. Which could be nothing or very little.

I’m in the opposite situation as you although lesser ratios (50:10). At the time I was happy to waive a larger split interest of just ring fencing what we brought in and continuing as equals. 15 years later I’m still happy with that. We’ve had some tough times but are fairly steady. I can see a future with us together or not but I think it’s now been so long I hope I’d never begrudge it.

you’ve only been together 6 years and the difference is greater. I’d say in a moment of calmness and not in the midst of an argument that he keeps bringing it up in arguments and you’re happy to discuss it calmly if he feels it’s unjust. Don’t let it fester if it’s something that’s bothering him. If he brings it up again in an unrelated argument just say you’re happy to discuss it calmly but it’s not related to now so let’s keep to the topic type thing.

but only do this if you’re actually willing to rebalance. As others have said if the house value goes down it also needs to be considered. Do you also have children or considering in the future as that will also change things.

I don’t believe conversations like these should be a one off ‘this is what we decided’. But I do think they change over time as situations change as you should both be open to discuss thoroughly and regularly for a healthy relationship

If he wants a much greater share of any appreciation in value and IF OP was on board with that (which she shouldn't be), he should be refunding her the relevant proportion of mortgage payments and of her contribution to any home improvements.

I don't understand the people saying he's better off in the scenario than if they were splitting any equity fairly.

Sorry bit late coming back to this, but to explain:

Say today the flat has lost £60,000 in value from purchase price:
Current 50/50 deal - His loss £30,000 Her loss £30,000
Proportional deal he is now proposing (77/23) - His loss £46,200 Her loss £13,800

Under the original 50/50 agreement, she would have absorbed more of the loss than her 5k stake would justify, and him less than his 100k stake would justify. So the original deal actually did protect him on any possible downside, he was getting loss-sharing that was generous to him relative to his contribution. The poster saying "how does their setup protect his deposit any more than buying alone?" is also wrong. Buying alone, he'd have 100% of any loss. Under this deal, she aborbs half.

The 50/50 structure was already skewed in his favour on risk. But now that the profit is secured, he wants to renegotiate the upside to be proportional to his contribution. But he never offered to take proportional downside risk when it was uncertain. He wanted the protection of shared losses, but the reward of solo or proportionate ownership. HTHs!

Hang on let me try it with actual numbers.

House worth 500k

So OP puts in 5k, DH puts in 100k.

They take a 395k mortgage.

Then let's say they pay (to make our maths easy) 500 each a month mortgage.

Then let's say the house loses the 60k you suggest over 2 years.

OP has put in 24 x 500 plus her original 5k meaning she's put 17k into the house.

DH has put in £112k.

Over two years let's say they pay 12k of capital from their payment. 6k of capital built each.

So they now have a mortgage balance of 383k.

They sell the house for 440k. They get 57k.

With a 50/50 split they walk away with 28.5k each.

So OP has put in 5, paid off 6 of capital and is overall 17.5k up.

DH has put in 100, paid off 6 and is overall 77.5k down.

How has that helped him!