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I have been in a cohabiting relationship for 20 years - we are living in a property that we have lived in for 12 years - we bought the property for £95,000 and the property is now valued at £190,000 my partner has chosen to end our relationship and I am planning to take over the mortgage in my own name. I need to be able to calculate the amount that would be due to my partner.

My partner has stated that he would be entitled to 12 years worth of the equity on the property - can you please advise as to how this would be calculated ?

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    Is it owned 50-50? That would probably be the default assumption unless there are specific reasons to argue otherwise. – Ganesh Sittampalam♦ Aug 27 '14 at 11:49
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First you need to decide between you how the equity should be split. Typically your partner would be entitled to half of the 12 years of equity that you have built up in the property, and almost certainly not all of it.

If the property is in both your names this would be a standard assumption. If it's in only one of your names then things may be more complicated, but the other partner would probably have been contributing to it either by paying some of the mortgage or contributing to other household expenses. If it isn't jointly owned and you can't come to an amicable arrangement, it may get legally messy (and expensive).

You can calculate the total equity in the property by taking the current value (£190,000) and subtracting the outstanding mortgage balance. You can confirm the exact number with your bank/building society at the time of transferring the mortgage.

Let's suppose that the mortgage balance is £60,000. Then the equity in the property is £190,000 - £60,000 = £130,000. With a 50-50 split, you would owe your partner his half of this, i.e. £65,000.

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    The issue now is to come up with a fair value. Unique houses are tougher to value than those in developments or where there are very similar houses nearby. – JoeTaxpayer♦ Aug 27 '14 at 12:39
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    The OP said it's valued at £190K and I don't see any mention of it being unique - is there something I'm missing? – Ganesh Sittampalam♦ Aug 27 '14 at 12:41
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    Property is a non-liquid asset. Liquidation usually comes with a pretty hefty fee (5-10%). Paying out the share of equity in cash may not be the 'fairest' thing to do. – Colin D Aug 27 '14 at 20:09
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    @ColinD good point, though I think 5-10% is overstating it for selling a house in the UK, and also the OP will potentially be saving on the costs of buying an alternative property. – Ganesh Sittampalam♦ Aug 27 '14 at 20:11
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    Even if the property is in both your names, is it owned as "joint tenants" or "tenants in common". If it's a joint tenancy, you effectively both own all of it and a 50-50 split of the equity is fair. If you own it as tenants in common, the split would be explicitly specified, and might be 50-50 or might be some other split depending on what you agreed at the time you bought the property (for example if one of you contributed more to the deposit, that might be reflected in an ownership split of 60-40 or whatever. Then it is harder to decide. – Vicky Aug 28 '14 at 10:00
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A 50-50 split sounds nice, however the individual who stays with the property is screwed in this calculation. Just come to a just in accurate split them out you must first calculate what the property is worth if it was listed actively. You also need to consider any repairs that would need to be done in order for the house to sell at that market price. So you have the market price of the house you have the amount of repairs it would take to sell the house and market price you take the top amount subtracted by the second amount and then you take 6 % or which ever is the prevailing rate to sell in your area. Only after you read taking out these two items would you split it 50-50.

Here’s an example, you have a $100,000 home with $60,000 worth of equity. The house needs to be painted before it can be sold a cost of approximately $6000. You take 6% for the sellers fee which in this example is $6000. You take the 6000 or seller fee plus the $6000 in repairs this is $12,000 you my Knigge $100,000 and your selling price that is actually $88,000 you subtract that from the $60,000 worth of equity you have in the two-party split the remaining $48,000 another words each couple gets $24,000.

If you just split it 50/50 from the beginning one would have received $30k and the other would have effectively been left with $18k (as potential repairs and listing fees are hidden costs).

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