Mathematicians in here please

[Delvis]

50/50 once each party has their deposit returned. I hate to see what you pair are going to be like when you have to buy your first pack of binliners.

You're really making your simple house purchase with a quest to complete by June massively overcomplicated.

This pretty much.

Swear there's a section that says person A's deposit, person B's deposit, how is the property owned 'shared/equally/split' or whatever. Your solicitor or mortgage advisor even may be able to help.

Cant recall what I put as a deposit but it was more than the wife, if we split it's 50/50 regardless the way I see it....hell I'm currently shelling out redoing the garden, wife can't afford the excess from wages so I'm paying for it, doesn't mean I go 'oh I spent x on the garden and increased the house value by y percent so gimme moarrrr'

If you're bothered, get a prenup or whatever it's called.

 

[jpaul]

maths is maths -
you need to express the future share %, as a function of the future resale value versus current purchase price, if you work it out, you get

A's share 750/i+50
B's share 50 - 750/i
where i is percentage change of future value, so if you resold at same price = 100% 57.5/42.5, or 300% 52.5/47.5


( A's share = [ P0.3x0.75+(Pi/100-P0.3)0.5 ] / (Pi/100) - P purchase price cancels out
assuming i > 30 ! )

This is what I can't get my head around. Surely if the mortgage is always paid equally then the person with the lower deposit is increasing their share of the total price more than the person with the bigger deposit?

so yes % changes.

 

[thenewoc]

50/50 once each party has their deposit returned. I hate to see what you pair are going to be like when you have to buy your first pack of binliners.

You're really making your simple house purchase with a quest to complete by June massively overcomplicated.

A joint bank account surely, funded by equal amounts from each. Only for household expenses though and groceries. Luxuries should come out of an individual's personal funds.

 

[Hawk Tuah]

A joint bank account surely, funded by equal amounts from each.

That's exactly what we've done from the start.

 

[Syla5]

Really not sure why this is being overly complicated.

Example:
House Price £300k

30% deposit - £90k

Person A deposit £67.5k
Person B deposit £22.5k

Remaining £210k 50/50 split.


If the unfortunate were to happen house gets sold, person A gets £67.5k + 50% of the remaining, Person B gets £22.5k + 50% of the remaining.....why do you even need to try and evaluate this down to one percentage number that massively over complicates things?

 

[thenewoc]

Really not sure why this is being overly complicated.

Example:
House Price £300k

30% deposit - £90k

Person A deposit £67.5k
Person B deposit £22.5k

Remaining £210k 50/50 split.


If the unfortunate were to happen house gets sold, person A gets £67.5k + 50% of the remaining, Person B gets £22.5k + 50% of the remaining.....why do you even need to try and evaluate this down to one percentage number that massively over complicates things?

Because the deposit represents a portion of the home rather than a flat amount to be returned.

 

[Hawk Tuah]

Because the deposit represents a portion of the home rather than a flat amount to be returned.

But that's only right if this is purely an investment and not a home.

I've spent the last 6 months building two new bathrooms. All out of my money and savings, not the joint account. Should I be totting up how much I've spent, and therefore what portion of the house is now more mine than my wifes?

Whilst doing this, my wife has covered most of the food shopping. Does that not add to the value of the house?

 

[hood1971]

If you work on percentages then an issue can arise if you split early on in the relationship.

Example
House costs 300,000
Party 1 deposit 75,000
Party 2 deposit 25,000

You split it 57.5/42.5

You split after a year and property sells for 300,000 still owing 200,000. Meaning you split 100,000. Using percentages party 1 gets 57,500 and party 2 gets 42,500

It is easier to have a codicil to specify that each person first gets back their initial deposit then remainder is split 50/50.

 

[thenewoc]

But that's only right if this is purely an investment and not a home.

I've spent the last 6 months building two new bathrooms. All out of my money and savings, not the joint account. Should I be totting up how much I've spent, and therefore what portion of the house is now more mine than my wifes?

Whilst doing this, my wife has covered most of the food shopping. Does that not add to the value of the house?

Different things are right for different people. The OP isn't married so in the early years of a relationship I'd say things are different. Using your example I would say both the home improvements and the groceries should come out of the joint account which should be equally funded. Despite how secure people think their relationships are, know one ever knows that a relationship is not going to run until death do us part.

 

[Deleted User 298457]

Different things are right for different people. The OP isn't married so in the early years of a relationship I'd say things are different. Using your example I would say both the home improvements and the groceries should come out of the joint account which should be equally funded. Despite how secure people think their relationships are, know one ever knows that a relationship is not going to run until death do us part.

Don't sign a mortgage then... to be as petty to include projected investment growth on your home is a new kind of special.

 

[thenewoc]

Don't sign a mortgage then... to be as petty to include projected investment growth on your home is a new kind of special.

I think it's more a case of if one partner has invested a lot more capital than the other and protecting that investment if the worst should occur.

 

[Deleted User 298457]

I think it's more a case of if one partner has invested a lot more capital than the other and protecting that investment if the worst should occur.

Getting the deposit back, yes. Totally agree. Investment returns on the deposit? Even with nominal house price growth we are talking pennies unless you are going into the half-decade, decade time horizon. There wouldn't even be enough investment growth to offset the expense to buy in the first place.

 

[Psycho Sonny]

From my understanding, person A: 0.3*0.75+0.35 = 0.575

Person B = 0.3*0.25+0.35 = 0.425

That only works if they split ways after the mortgage is paid off so in 30 years time or whatever.

If the decide to split ways after 6 months. His share would be close to 75% and hers 25%.

 

[Kenai]

Can the agreed share % in a TIC agreement be updated?

Maybe you could agree to get it updated every 5 years say, so it's reflective of a relatively recent update should you split at any point.

If you entered the agreement as 57/43% now and split in a year, you'd take a hiding on your deposit amount.

 

[D.P.]

ignoring the maths, this is largely a waste of time. Even if you are not married,if you are living together and own a house with proof thst each of you sre making payments or doing upkeep, then your partner will have a legal right to 50% of the house.

 

[Kenai]

ignoring the maths, this is largely a waste of time. Even if you are not married,if you are living together and own a house with proof thst each of you sre making payments or doing upkeep, then your partner will have a legal right to 50% of the house.

In a joint tenancy yes, but afaik the entire point of a TIC agreement is to pre-agree a % split, that doesn't necessarily have to be 50/50

 

[thenewoc]

If you work on percentages then an issue can arise if you split early on in the relationship.

Example
House costs 300,000
Party 1 deposit 75,000
Party 2 deposit 25,000

You split it 57.5/42.5

You split after a year and property sells for 300,000 still owing 200,000. Meaning you split 100,000. Using percentages party 1 gets 57,500 and party 2 gets 42,500

It is easier to have a codicil to specify that each person first gets back their initial deposit then remainder is split 50/50.

You've made the mistake of using the original percentages from the OP's example.

In your example it should be:

0.33 x 0.75 + 0.33 recurring = 0.58083 recurring
0.33 x 0.25 + 0.33 recurring = 0.41583 recurring

Therefore, if property sells for 300,000 still owing 200,000. Using percentages party 1 gets 74,250 and party 2 gets 24,750. Since you wouldn't over pay the outstanding mortgage with the spare 1,000 from the formula rounding issue you'd split that 1k by 75% and 25% respectively and that would see each investor returned with their initial deposits. So you could express the requirement with a single percentage as long as it was caveated that anything left after the owner's share percentage is calculated and the remaining mortgage cleared that such remainder is split on the basis of the original deposit percentage share proportions.


Assuming the property went up to 400,000 and it was an interest only mortgage for simplicity sake.

400,000 x 0.58083 recurring = 232,333 - 100,000 = 132,333 - 75,000 = 57,333 profit
400,000 x 0.41583 recurring = 166,333 - 100,000 = 66,333 - 25,000 = 38,333 profit

It doesn't work out quite right due to rounding I think in the formula since the above only totals 95,666 and should total 100k. I guess you'd split the other 4,334 75/25.

 

[thenewoc]

Getting the deposit back, yes. Totally agree. Investment returns on the deposit? Even with nominal house price growth we are talking pennies unless you are going into the half-decade, decade time horizon. There wouldn't even be enough investment growth to offset the expense to buy in the first place.

Not where I am, we bought a house at a good price 8 years ago and it's now worth over a third more.

 

[Deleted User 298457]

Not where I am, we bought a house at a good price 8 years ago and it's now worth over a third more.

That's my point. The investment protection OP is talking about should hopefully die a death as soon as they get married, have kids, whatever else. Its meaning and purpose should "time expire" as they grow together. Otherwise they are going to be stuck at maturity level 1, arguing over who pays for the soap this week and what happens if one wants a side with their takeaway and the other doesn't...

 

[Syla5]

Because the deposit represents a portion of the home rather than a flat amount to be returned.

Using a more complicated % approach you will often benefit the smaller deposit payer to a greater degree, is that fair? Also why overcomplicate things?

Buy house for £300k, £200k mortgage.

Sell house for £400k, outstanding mortgage £150k
£250k remaining to distribute.

% driven distribution:
£75k deposit payer - 58.33% effective share receives £145,825. Net of deposit £70,825
£25k deposit payer - 41.66% effective share receives £104,158. Net of deposit £79,158

Same situation but fixed deposit return:

Sell house for £400k, outstanding mortgage £150k
£250k remaining to distribute - £100k in deposits.
Final remaining £150k

£75k deposit payer - £75k deposit + £75k 50% of remaining, total return £150k (net of deposit £75k)
£25k deposit payer - £25k deposit + £75k 50% of remaining, total return £100k (net of deposit £75k)


As the sale price reduces the higher deposit payer loses out to a greater degree.

Hence why keeping it simple is often fairest by for both parties and least likely to cause any contention.

It only becomes favourable to the higher deposit payer in these examples once the house is selling for 33% more then purchase price and outstanding debt to clear after sale is 33% or less of the original purchase price.

Also, is it really worth the extra hassle and over complication, return of original deposits then 50/50 split is the simplest solution.