Tenants in common - any deed of trust experts able to help?
Discussion
Morning all.
About to buy a property with partner (unmarried) and will be owned as tenants in common with deed of trust. The first owner will put X amount down as deposit and then subsequently pay all of the mortgage repayments. The second owner will pay 50% of the purchase price up front and 50% of any improvements made to the property. Will not contribute towards the mortgage.
Does the wording below indicate that the second owner will own 50% of the "ongoing property value", net sale proceeds, net rental income. All of which EXCLUDE the mortgage repayments and outstanding mortgage debt which is the responsibility of the first owner?
"The Owners shall own the Property, its net sale proceeds and any net rents or profits in equal shares subject to the following special conditions:
1) any Mortgage Payments shall be deducted from the First Owner's percentage share only;
2) if any Owner contributes more than an equal share to any Expenditure then his or her percentage share of the Property, its net sale proceeds and any net rents or profits shall be adjusted accordingly."
About to buy a property with partner (unmarried) and will be owned as tenants in common with deed of trust. The first owner will put X amount down as deposit and then subsequently pay all of the mortgage repayments. The second owner will pay 50% of the purchase price up front and 50% of any improvements made to the property. Will not contribute towards the mortgage.
Does the wording below indicate that the second owner will own 50% of the "ongoing property value", net sale proceeds, net rental income. All of which EXCLUDE the mortgage repayments and outstanding mortgage debt which is the responsibility of the first owner?
"The Owners shall own the Property, its net sale proceeds and any net rents or profits in equal shares subject to the following special conditions:
1) any Mortgage Payments shall be deducted from the First Owner's percentage share only;
2) if any Owner contributes more than an equal share to any Expenditure then his or her percentage share of the Property, its net sale proceeds and any net rents or profits shall be adjusted accordingly."
Crockefeller said:
About to buy a property with partner (unmarried) and will be owned as tenants in common with deed of trust. The first owner will put X amount down as deposit and then subsequently pay all of the mortgage repayments. The second owner will pay 50% of the purchase price up front and 50% of any improvements made to the property. Will not contribute towards the mortgage.
How will you get a mortgage for 50% of a house? I can't see any lender wanting to do that.Or is the mortgage in both names but only one pays it off. If that is the case and you are repossessed the agreement between the two of you will be irrelevant. The lender will want all their money and costs back from whatever the house is worth at that point.
It is not an equitable arrangement. If I was the one with the big deposit I would be worried that the other could stop paying the mortgage/run off leaving me holding the baby. On the other hand if the deposit payer wants to leave/run off their asset is tied up with the mortgage and they can't get out.
The mortgage is for the whole house and both parties are liable from the banks point of view should the debt be called in.
The purpose of the deed between the two owners is to establish that one of the parties intends to pay the mortgage in its entirety whilst the other pays nothing (as they've already contributed 50% of the purchase price) and that only once the mortgage has been paid off in full will the equity be split equally 50/50.
Until the mortgage is paid off then the agreement between the two owners is that the one not paying the mortgage repayments has 50% of the house and the other has 50% minus whatever they owe the mortgage lender.
Does that make sense?
The purpose of the deed between the two owners is to establish that one of the parties intends to pay the mortgage in its entirety whilst the other pays nothing (as they've already contributed 50% of the purchase price) and that only once the mortgage has been paid off in full will the equity be split equally 50/50.
Until the mortgage is paid off then the agreement between the two owners is that the one not paying the mortgage repayments has 50% of the house and the other has 50% minus whatever they owe the mortgage lender.
Does that make sense?
Crockefeller said:
Does that make sense?
It makes sense but it needs a reality check.If the mortgage goes into arrears, interest rates go up, house prices fall and the lender repossesses then the deposit payer will loose 50% of whatever the lender chooses to take from the value of the property, regardless of any 3rd party agreement.
It also ignores what happens if the mortgage payer decides to bugger off, the deposit payer will still have to pay off the mortgage, on their own. The lender will not chase the original payer, they have the charge on the house and the deposit payer is on the hook.
The deposit payer is in an incredibly weak, very unfair position. Once explained fully I don't think anyone would agree to it.
Ean218 said:
It makes sense but it needs a reality check.
If the mortgage goes into arrears, interest rates go up, house prices fall and the lender repossesses then the deposit payer will loose 50% of whatever the lender chooses to take from the value of the property, regardless of any 3rd party agreement.
It also ignores what happens if the mortgage payer decides to bugger off, the deposit payer will still have to pay off the mortgage, on their own. The lender will not chase the original payer, they have the charge on the house and the deposit payer is on the hook.
The deposit payer is in an incredibly weak, very unfair position. Once explained fully I don't think anyone would agree to it.
Apologies, I may not have been very clear in what is trying to be achieved with the deed of trust.If the mortgage goes into arrears, interest rates go up, house prices fall and the lender repossesses then the deposit payer will loose 50% of whatever the lender chooses to take from the value of the property, regardless of any 3rd party agreement.
It also ignores what happens if the mortgage payer decides to bugger off, the deposit payer will still have to pay off the mortgage, on their own. The lender will not chase the original payer, they have the charge on the house and the deposit payer is on the hook.
The deposit payer is in an incredibly weak, very unfair position. Once explained fully I don't think anyone would agree to it.
Both owners understand that the mortgage needs to be paid and that if it isn't the lender will come after both for the money and won't care about this agreement between the owners.
The intention is however, that one owner will be paying the mortgage to eventually own the 50% of the property equally with the other owner.
If the owner who made the lower deposit decides not to pay, runs off with the neighbour etc, the remaining, big deposit owner does have the means to pay off the mortgage in one go and the share in the property, when this is done should reflect this.
Probably best I call the solicitor!
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