Daughter & Partner Buying House - Deposit Question

[anonymous-user]

My daughter and her partner are buying a house together. They are not engaged but otherwise in a ltr.

My daughter is putting up all the deposit for the house, the boyfriend isn't putting any deposit in.

The mortgage would be in joint names.

If they split would the equity (i.e. the deposit) get split 50:50? Seems very unfair. Is there a legal way to safeguard this?

I was thinking the equity should be split in the ratio of the funds they put into the house, so if they pay the mortgage 50:50 then on day 1 the boyfriend gets nothing but after ten years it would be more like say 60:40 in my daughter's favour an dif they get married then it all becomes irrelevant.

Is this something the conveyancer could sort out or is it illegal etc?

Many thanks.

[anonymous-user]

That is doable. But how to structure the ownership is your daughter’s choice, surely. If she is happy to split it 50/50 (bluntly) what business is it of yours?

[james_zy]

A lawyer needs to give you good advice here, but what I CAN say from personal experience is that if they were married and they divorced, he has a claim on the marital assets which includes the house, regardless of the extent to which he paid any deposit. If there is equity in the house, he is entitled to his share which would include half of the equity gained by the deposit.

In these situations, one option is to loan your daughter the deposit. I don't think you even need to charge her interest, but there needs to be a formal contract. In a divorce scenario, you could recall the loan (preventing him from getting half).

I am not sure what happens if they aren't married (hence suggesting a lawyer). Obviously if they have children, it would get more complicated still.

If it were me, I would be doing it as a loan.

[Tye Green]

she needs a co-habitation agreement

[paolow]

in such a situation - my experience is dated - but you can be joint tenants of the property or tenants in common.

With joint tenants you are split 50:50. Tenants in common have a specified share taking into account the unequal weighting of the mortgage deposit. ie - i stumped up the deposit so the share is 55% to the 'non stumpers' 45% in the event of a sale.

I am not a lawyer, solicitor, estate agent or who knows what - but a google for tenants in common might be what you are looking for

[Puzzles]

This is how I would do it (not a lawyer)

If she puts in 25% deposit and he puts in 0%

the remaining 75% is paid by a joint mortgage so 75% / 2 = 37.5%

She owns 62.5% (25% + 37.5%) and he owns 37.5% and both pay half the mortgage

[Happy Jim]

I did this with my daughter and her BF (long term type), same scenario, she had the chunky deposit him not. Via the Solictor we drew an agreement that “on future sale” mortgage gets repaid, then deposit gets paid to daughter, surplus (if any) is split 50/50 (they pay mortgage & bills evenly) - seemed fair all round and protected her deposit should they fall out.

Jim

[kiethton]

Happy Jim said:

I did this with my daughter and her BF (long term type), same scenario, she had the chunky deposit him not. Via the Solictor we drew an agreement that “on future sale” mortgage gets repaid, then deposit gets paid to daughter, surplus (if any) is split 50/50 (they pay mortgage & bills evenly) - seemed fair all round and protected her deposit should they fall out.

Jim

This is what I did with my now wife (but as I also paid most of the bills it was to split the equity in proportion to payments into the joint bank account)

Edited by kiethton on Wednesday 3rd August 20:34

[Puzzles]

Happy Jim said:

I did this with my daughter and her BF (long term type), same scenario, she had the chunky deposit him not. Via the Solictor we drew an agreement that “on future sale” mortgage gets repaid, then deposit gets paid to daughter, surplus (if any) is split 50/50 (they pay mortgage & bills evenly) - seemed fair all round and protected her deposit should they fall out.

Jim

Problem is she doesn't benefit from price increases

[soxboy]

Puzzles said:

Happy Jim said:

I did this with my daughter and her BF (long term type), same scenario, she had the chunky deposit him not. Via the Solictor we drew an agreement that “on future sale” mortgage gets repaid, then deposit gets paid to daughter, surplus (if any) is split 50/50 (they pay mortgage & bills evenly) - seemed fair all round and protected her deposit should they fall out.

Jim

Problem is she doesn't benefit from price increases

Maybe index link the deposit sum to say Nationwide house price index?

House sale proceeds, less outstanding mortgage, less whatever deposit sum has increased to at time of sale, is then split between the parties if it all goes wrong.

[MitchT]

Surely it's a simple as...

She puts down 25%.
Mortgage is paid 50:50.
If they split at a later date and sell the house, she gets the first 25% of the proceeds, any further equity is split 50:50.

[lizardbrain]

House is 500k.

Say A puts down 50% cash. 50% is mortgaged between a and b.

House increases in value by 20% to 600. They sell. Mortgage remaining is 200k

A gets her 50% back, 300k.

Mortgage is paid off leaving 100k which is split equally. B gets 50k.

A gets two lots of 50k.

Sucks to be B!


Is that right?

[MR2 Steve]

I would get the daughter to tell her solicitor to put a 2nd charge on the house for the value of the deposit. That way when it’s sold she gets it back before any equity is split 50/50. Seems the simplest and fair to other half who has paid half the mortgage.

[Nickbrapp]

be VERY careful when it comes to Tenants in common Or a deed of trust

I was in this situation, I was going to get a mortgage and my partner was going to give me the deposit but as we aren’t married it was going to be protected with a deed of trust if we broke up he could get his money back
(He couldn’t be on the mortgage due to a temporary work contract)

It was all progressing well until just before exchange, The solictor told the bank about the deed of trust, they would not accept this and due to Taylor wimpey not being willing to wait for us to get another mortgage they pulled the house sale. Losing me £2500 in fees (which I did sue the mortgage advisor for and won)

Some banks - NatWest, will allow a deed of trust but make sure you get very good written advice.


And for those who may say - surely it’s ok if you love someone you can just give their money back, it doesn’t always work like that if you split up.

[lizardbrain]

Curious why a bank wouldn’t like a deed of trust? Does hsbc allow it?

(Currently doing similar)

[anonymous-user]

Nickbrapp said:

be VERY careful when it comes to Tenants in common Or a deed of trust

I was in this situation, I was going to get a mortgage and my partner was going to give me the deposit but as we aren’t married it was going to be protected with a deed of trust if we broke up he could get his money back
(He couldn’t be on the mortgage due to a temporary work contract)

It was all progressing well until just before exchange, The solictor told the bank about the deed of trust, they would not accept this and due to Taylor wimpey not being willing to wait for us to get another mortgage they pulled the house sale. Losing me £2500 in fees (which I did sue the mortgage advisor for and won)

Some banks - NatWest, will allow a deed of trust but make sure you get very good written advice.


And for those who may say - surely it’s ok if you love someone you can just give their money back, it doesn’t always work like that if you split up.

Thanks for this. I can imagine (some?) banks will be wary of deeds of trust or charges on the deeds etc. I think the only way without spooking a bank is a contract between the two of them defining how the equity is split in the event they split.

[anonymous-user]

Tye Green said:

she needs a co-habitation agreement

Never heard of them but will look it up thanks.

[anonymous-user]

MitchT said:

Surely it's a simple as...

She puts down 25%.
Mortgage is paid 50:50.
If they split at a later date and sell the house, she gets the first 25% of the proceeds, any further equity is split 50:50.

That sounds better, to do it based on percentages. Thanks.

[PostHeads123]

Was in same situation years ago I was paying the deposit and joint morg, get a Tennants In Common agreement in place detailing what happens if they split solicitor will be able to sort, it saved my ass in the end when we split up.

Edited by PostHeads123 on Thursday 4th August 22:07

[pork911]

With respect, it seems he cannot afford this purchase.