What are fair methods to buy out an equal share holder in a mortgaged property?
My partner and I, and her parents have entered in to a mortgage on a piece of land. It is understood (verbal agreement only) that my partner and I 'own' half of the land and her parents the other half .
The deposit amounted to 1/3 the cost of the land and was covered equally by each party.
We have since made regular payments towards the mortgage in equal balance, at a rate that is taking care of the interest and some of the principal.
The land valuation has increased such that if it sold at that value, we'd get back our deposit and effectively have been putting our mortgage repayments in to a low-interest saving account.
My partner's parents went in to this to give us a step up in to land ownership and had plans to live there occasionally when they retired (we had plans to build on the land). Due to life changes they no longer have plans to live there and are effectively just helping us out. Although I'm just guessing, they may have justified it financially as a longer term investment.
My partner's parent's financial situation is no longer stable and we feel it would be prudent to seperate financially and 'buy them out'.
What is a fair way to go about this:
- In the case that there is the interpersonal dimension of parent/child relationships to account for.
- In the case that there isn't.
(should there be a difference?)
Options as we see them:
- Pay them the sum of their deposit and mortgage payments up until this point?
- Pay them half of the valuation?
Some other method?
Yes, we should have considered this beforehand! Although it was discussed between my partner and I, we stopped short of talking to her parents.
I have searched for similar questions, of which there are a few, however they either deal with more complex cases (unequal distributions of payments), or they are relevant, but unanswered due to not giving enough information.