Unmarried 1st time buyers question
Discussion
Guy has a relatively insignificant Deposit 5k, lady has half buying price as a Deposit 250k, so how should the Mortgage 250k be constructed, if they want to buy together ? And the ownership ? Basically, been together 3 years renting, but assuming worst scenario in a few years, how would both fairly be protected, if still unmarried ?
Can't get my head around it (numbers just for scale of the issue)
Many thanks, Big Ant
Can't get my head around it (numbers just for scale of the issue)
Many thanks, Big Ant
If she puts more money into the project than you, then she will be entitled to a bigger share of the proceeds if the property is eventually sold.
This may change over time if you contribute more to the day to day running of the household or put more of your money into the project.
However, not being married, there are no automatic legal rights at issue here. Proceeds on the shareout of any disposal proceeds (or valuation for the purpose of buying the other party out) would be based on the facts and history of the situation.
You could draft up a legal contract to try and set out in black and white what would happen in the event of a break up - but couples are often reluctant (for obvious reasons) to go down this "legalistic" route. And it would cost if you used a solicitor to draft such a contract.
This may change over time if you contribute more to the day to day running of the household or put more of your money into the project.
However, not being married, there are no automatic legal rights at issue here. Proceeds on the shareout of any disposal proceeds (or valuation for the purpose of buying the other party out) would be based on the facts and history of the situation.
You could draft up a legal contract to try and set out in black and white what would happen in the event of a break up - but couples are often reluctant (for obvious reasons) to go down this "legalistic" route. And it would cost if you used a solicitor to draft such a contract.
Edited by Eric Mc on Friday 18th January 08:34
Thanks all for replies.
I think the numbers are big enough, Cash element at least, to justify a "legalistic" attitude as EricMc suggests, and confirmed by "Deed of Trust" suggestion. Once done, matter is forgotten, sure they can get over it.
Need to think if Mortgage should be in joint names ? Then a shared bank account, feeding it and household bills. Joint Tenants is probably a mortgagor requirement, and that would then suggest a joint mortgage, I guess.
Nothing straight-forward anymore. I am father of the lady, and she seeks my opinion....nice to have Pistonheads !
Big Ant
I think the numbers are big enough, Cash element at least, to justify a "legalistic" attitude as EricMc suggests, and confirmed by "Deed of Trust" suggestion. Once done, matter is forgotten, sure they can get over it.
Need to think if Mortgage should be in joint names ? Then a shared bank account, feeding it and household bills. Joint Tenants is probably a mortgagor requirement, and that would then suggest a joint mortgage, I guess.
Nothing straight-forward anymore. I am father of the lady, and she seeks my opinion....nice to have Pistonheads !
Big Ant
big ant said:
Thanks all for replies.
I think the numbers are big enough, Cash element at least, to justify a "legalistic" attitude as EricMc suggests, and confirmed by "Deed of Trust" suggestion. Once done, matter is forgotten, sure they can get over it.
Need to think if Mortgage should be in joint names ? Then a shared bank account, feeding it and household bills. Joint Tenants is probably a mortgagor requirement, and that would then suggest a joint mortgage, I guess.
Nothing straight-forward anymore. I am father of the lady, and she seeks my opinion....nice to have Pistonheads !
Big Ant
If the guy is supplying ANY amount of deposit he will be required to be on the mortgage.I think the numbers are big enough, Cash element at least, to justify a "legalistic" attitude as EricMc suggests, and confirmed by "Deed of Trust" suggestion. Once done, matter is forgotten, sure they can get over it.
Need to think if Mortgage should be in joint names ? Then a shared bank account, feeding it and household bills. Joint Tenants is probably a mortgagor requirement, and that would then suggest a joint mortgage, I guess.
Nothing straight-forward anymore. I am father of the lady, and she seeks my opinion....nice to have Pistonheads !
Big Ant
A lot of people nowadays seem to like to keep their finances separate and get their salaries paid into their own accounts and then pay a set amount into a joint account to cover all monthly outgoings such as mortgage and bill etc.
Or she could buy it on her own, in her name, using her deposit with a view to adding him at the time of the next remortgage in 2 years, depending on the product chosen.
Sarnie said:
It looks fairly simple to me;
Buy the property as Joint Tennants.
Both pay half of the mortgage payments and all maintaince costs incurred.
Upon sale, she takes her £250k, you take your £5k and then split half the profit if there is any.
If I was her, I'd never agree to that deal. She puts in (risks) 98% of the deposit, which reduces his half of the mortgage payments, so he can take 50% of any profit when they split? I don't think so.Buy the property as Joint Tennants.
Both pay half of the mortgage payments and all maintaince costs incurred.
Upon sale, she takes her £250k, you take your £5k and then split half the profit if there is any.
Sharing the profit equally would only work if they went 50/50 on the deposit or he pays 98% of the mortgage.
dunmow70 said:
If I was her, I'd never agree to that deal. She puts in (risks) 98% of the deposit, which reduces his half of the mortgage payments, so he can take 50% of any profit when they split? I don't think so.
Sharing the profit equally would only work if they went 50/50 on the deposit or he pays 98% of the mortgage.
Whether you'd agree to it or not, thats what he'd be entitled to. I've hardly ever seen a couple that have contributed EXACTLY 50% of the deposit each.Sharing the profit equally would only work if they went 50/50 on the deposit or he pays 98% of the mortgage.
Deed of Trust is the only way to go in that situation.
You can agree that on the sale of the property you get your 5k back, she gets her 250k back and then any remaining equity can be split in whatever percentages you decide (at the time of drafting the deed). In the event of relationship breakdown then the deed will also make clear who is responsible for estate agents / solicitors fees and on what basis the valuation will be made.
Very handy things in these circumstances.
You can agree that on the sale of the property you get your 5k back, she gets her 250k back and then any remaining equity can be split in whatever percentages you decide (at the time of drafting the deed). In the event of relationship breakdown then the deed will also make clear who is responsible for estate agents / solicitors fees and on what basis the valuation will be made.
Very handy things in these circumstances.
Sarnie said:
Whether you'd agree to it or not, thats what he'd be entitled to. I've hardly ever seen a couple that have contributed EXACTLY 50% of the deposit each.
If they're unmarried, they can draw up a contract however they see fit. Think of it this way:
The asset price is £500k.
The investor puts in all the capital to allow the investment to take place - £250k.
The investment means the loan for the outstanding amount carries a lower interest rate. Without that, the partner could not afford the asset.
The loan on the asset is repaid equally by both parties.
The asset is sold in the future at a value greater than the purchase price.
The outstanding loan is repaid.
£250k is handed back to the investor (this should also rise with inflation else they will be out of pocket).
Is it now fair that the lesser partner, who invested nothing, who shared none of the risk, now gets 50% of the profit despite only contributing towards 25% of the asset? Of course not. 50% of the profit should go straight to the investor and the remaining 50% should then be split between them.
dunmow70 said:
Sarnie said:
Whether you'd agree to it or not, thats what he'd be entitled to. I've hardly ever seen a couple that have contributed EXACTLY 50% of the deposit each.
If they're unmarried, they can draw up a contract however they see fit. Think of it this way:
The asset price is £500k.
The investor puts in all the capital to allow the investment to take place - £250k.
The investment means the loan for the outstanding amount carries a lower interest rate. Without that, the partner could not afford the asset.
The loan on the asset is repaid equally by both parties.
The asset is sold in the future at a value greater than the purchase price.
The outstanding loan is repaid.
£250k is handed back to the investor (this should also rise with inflation else they will be out of pocket).
Is it now fair that the lesser partner, who invested nothing, who shared none of the risk, now gets 50% of the profit despite only contributing towards 25% of the asset? Of course not. 50% of the profit should go straight to the investor and the remaining 50% should then be split between them.
If it was me I would rather pay £500-1500 then risk several hundred grand...
Simple to do, ut most people dont like the idea of paying money out for a contract and would rather risk the money and pay shed loads fighting it out later on.
dunmow70 said:
If they're unmarried, they can draw up a contract however they see fit.
Think of it this way:
The asset price is £500k.
The investor puts in all the capital to allow the investment to take place - £250k.
The investment means the loan for the outstanding amount carries a lower interest rate. Without that, the partner could not afford the asset.
The loan on the asset is repaid equally by both parties.
The asset is sold in the future at a value greater than the purchase price.
The outstanding loan is repaid.
£250k is handed back to the investor (this should also rise with inflation else they will be out of pocket).
Is it now fair that the lesser partner, who invested nothing, who shared none of the risk, now gets 50% of the profit despite only contributing towards 25% of the asset? Of course not. 50% of the profit should go straight to the investor and the remaining 50% should then be split between them.
I'm not sure why you are introducing a third party 'investor' to the transaction??Think of it this way:
The asset price is £500k.
The investor puts in all the capital to allow the investment to take place - £250k.
The investment means the loan for the outstanding amount carries a lower interest rate. Without that, the partner could not afford the asset.
The loan on the asset is repaid equally by both parties.
The asset is sold in the future at a value greater than the purchase price.
The outstanding loan is repaid.
£250k is handed back to the investor (this should also rise with inflation else they will be out of pocket).
Is it now fair that the lesser partner, who invested nothing, who shared none of the risk, now gets 50% of the profit despite only contributing towards 25% of the asset? Of course not. 50% of the profit should go straight to the investor and the remaining 50% should then be split between them.
To be fair you could take this to any degree you like;
How about as he only contributed 2% of the deposit then he pays 98% of the mortgage???
Sarnie said:
dunmow70 said:
If they're unmarried, they can draw up a contract however they see fit.
Think of it this way:
The asset price is £500k.
The investor puts in all the capital to allow the investment to take place - £250k.
The investment means the loan for the outstanding amount carries a lower interest rate. Without that, the partner could not afford the asset.
The loan on the asset is repaid equally by both parties.
The asset is sold in the future at a value greater than the purchase price.
The outstanding loan is repaid.
£250k is handed back to the investor (this should also rise with inflation else they will be out of pocket).
Is it now fair that the lesser partner, who invested nothing, who shared none of the risk, now gets 50% of the profit despite only contributing towards 25% of the asset? Of course not. 50% of the profit should go straight to the investor and the remaining 50% should then be split between them.
I'm not sure why you are introducing a third party 'investor' to the transaction??Think of it this way:
The asset price is £500k.
The investor puts in all the capital to allow the investment to take place - £250k.
The investment means the loan for the outstanding amount carries a lower interest rate. Without that, the partner could not afford the asset.
The loan on the asset is repaid equally by both parties.
The asset is sold in the future at a value greater than the purchase price.
The outstanding loan is repaid.
£250k is handed back to the investor (this should also rise with inflation else they will be out of pocket).
Is it now fair that the lesser partner, who invested nothing, who shared none of the risk, now gets 50% of the profit despite only contributing towards 25% of the asset? Of course not. 50% of the profit should go straight to the investor and the remaining 50% should then be split between them.
To be fair you could take this to any degree you like;
How about as he only contributed 2% of the deposit then he pays 98% of the mortgage???
And yes, as I put in my original reply, he could also pay 98% of the mortgage
Personally, if I were the investor, I'd purchase a separate property with the £250k, rent it out and then live with the partner somewhere else that we could both afford on a truly 50/50 split.
Simply go to your solicitor and ask him to talk you through the options for a deed of trust.
He/She will be happy that you are thinking of what may happen in the future rather than dealing with the mess after things go wrong.
Hopefully you will never have to revert to the deed of trust.
He/She will be happy that you are thinking of what may happen in the future rather than dealing with the mess after things go wrong.
Hopefully you will never have to revert to the deed of trust.
rhodz2001uk said:
Simply go to your solicitor and ask him to talk you through the options for a deed of trust.
He/She will be happy that you are thinking of what may happen in the future rather than dealing with the mess after things go wrong.
Hopefully you will never have to revert to the deed of trust.
This works...He/She will be happy that you are thinking of what may happen in the future rather than dealing with the mess after things go wrong.
Hopefully you will never have to revert to the deed of trust.
Or just buy it ones self and then charge other half rent, I do that with mine (her idea) and everything is split down the middle, but its rent and not mortgage she pays.
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