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Property value : £484,950

My deposit: £20,000

( plus additional fees for stamp duty of £11,000 payment from myself)

Her deposit: £4,247

Help to buy government 40% gov loan interest free for 5 years £193,980 applied for through both of us.

2nd finance with 25 yr mortgage £266,723 being paid off by both of us

How do we calculate ownership in the event the relationship terminates? As per the above I am contributing £31,000 and my partner is contributing £4,242.

  • 5
    Thanks entirely up to the two of you, I'm afraid. Work our what both of you consider fair -- before signing anything else! and get a lawyer to review that and turn it into a binding contract between you. Failing to do so would almost guarantee a screaming fight at some point in the future. The only way to do business with friends that doesn't cost you the friendship eventually is to keep the business part on a business fitting. – keshlam Mar 16 '16 at 16:23
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    In my case, we had a lawyer review our agreement but did not get him to convert it into 'legalese'. We just left it as a plain-English document and made some minor changes to clarify. – ChrisInEdmonton Mar 16 '16 at 16:26
  • Can you seriously get a property with that valuation with that little initial deposit? – MackieeE Mar 18 '16 at 14:53
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I can't quite follow your question, so I'm proceeding under the following assumptions: - You paid £31,000 - Your partner paid £4,242 - You have at least one mortgage, which you both pay equally.

If the relationship terminates, sell the property. You are reimbursed £31,000 and your partner is reimbursed £4,242. Any remaining proceeds from the sale are split 50-50. If the result is a net loss (i.e. you are underwater on your mortgage), you split the debt 50-50. If you are not both paying the same toward the mortgage, I'd split the profit or loss according to how much you each pay toward the mortgage.

Of course, this is not the only possible way you can split things up. You can use pretty much any way you both think is fair. For example, maybe you should get more benefits from a profit because you contributed more up-front. The key thing, though, is that you must both agree in writing, in advance. This is reasonable; this is what I did, for example.

Note that if the relationship ends, one or the other of you may wish to keep the property. I'd suggest including a clause in your written agreement simply disallowing this; specify criteria to force a sale. But I know lots of people are happy to allow this. They treat that situation as a forced sale from both people to one person. For example, if your partner chooses to stay in the house, he or she must buy the property from you at prevailing market rates.

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To add to ChrisInEdmonton's answer:

Your conveyancing solicitor should be able to advise on the details, but a typical arrangement involves:

  1. Buying as tenants in common (as opposed to joint tenants).
  2. Drawing up a Declaration of Trust, which contains the details of each person's share, and how any proceeds should be divided.
  3. Updating your will, to ensure that (for example) your share of the property goes to your partner if something happens to you (which is especially important if you're not married to each other).

As an alternative to the numbers in Chris' answer, it could be argued that you should first be reimbursed for the fees you paid (accounting for inflation), but that any remaining profits from the property itself should be divided in proportion to your individual investments (so 51.6% to you, and 48.4% to your partner, assuming you contribute to the loans equally).

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i would recommend that you establish a landlord/tenant relationship instead of joint ownership (ie 100% ownership stake for one of you vs 0% for the other). it is much cleaner and simpler. basically, one of you can propose a monthly rent amount and the other one can chose to be either renter or landlord. alternatively, you can both write down a secret rental price offer assuming you are the landlord, then pick the landlord who wrote down the smaller rental price.

if neither of you can afford the down payment, then you can consider the renter's contribution an unsecured loan (at an agreed interest rate and payment schedule). if you must have both names on the financing, then i would recommend you sell the property (or refinance under a single name) as quickly as possible when the relationship ends (if not before), pay the renter back any remaining balance on the loan and leave the landlord with the resulting equity (or debt).

in any case, if you expect the unsecured loan to outlive your relationship, then you are either buying a house you can't afford, or partnering on it with someone you shouldn't.

  • Interesting alternative approach. – keshlam Mar 16 '16 at 21:31

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