Q I appreciate it’s an unusual time to be concerned with mortgage splits, but my boyfriend and I bought a house more than a year ago and we still haven’t drafted a deed of trust. With all the uncertainties at the moment, we agree now is a good time – we just need to agree on the terms.
We bought a maisonette that needed a lot of work. I had the deposit from my savings (27%), we split the mortgage equally, and he’s worked hard renovating the place. He’s freelance, which was of course his choice, but I do appreciate this has probably eaten into his earnings.
So how to split? He’s suggesting I recoup the exact sum I put in, plus the costs of the repairs that he didn’t do himself and the materials I bought. Then we share the profit 50/50. I feel I should get a bit more because I invested all my savings in it upfront.
I’m thinking about a percentage split but I can’t work it out. I am keen for the proportion to reflect the amazing work he’s done on the property and the time he’s given. I put in 27% and we borrowed 73% (36.5% each), which means I technically own 63.5% and he owns 36.5%. So would it be a good idea to level these numbers out to 60/40, suggest I recoup the amount I put in and we split the profits along those lines?
This is further complicated by his family giving us a new kitchen (they have a kitchen business) and letting us use their Travis Perkins account. Do you have any suggestions?
GA
A My first thought was that it’s a relief that you split your mortgage payments down the middle because if you didn’t it could get really complicated. My next thought was that I don’t like either your boyfriend’s proposed split nor do I like yours, although the sentiments in wanting to recognise his contribution to the property are admirable. It’s just that the sums leave a lot to be desired. My third thought was that you and your boyfriend should consider having what’s called a “commensurate share deed” or “floating deed of trust” drawn up.
That’s because most standard deeds of trust set out what each person will get back on the sale of the property, either as fixed amounts or fixed percentages, or a mixture of both. Even if you put down different amounts for the deposit, this works fine if you then split the mortgage payments and costs of improvements to the property down the middle.
The reason I think a floating deed of trust would suit you is because instead of giving fixed amounts or percentages, a floating deed can give a formula to calculate each owner’s share at the point the property is sold, and which can also reflect the contributions each owner has made to the property over time. Working out that formula is pretty straightforward. You each need to add up how much you have contributed to the property, including contributions to the purchase price, purchase costs (such as stamp duty, land tax and legal fees) and improvements to the property.
In your boyfriend’s list, under contribution to improvements, he should consider including a figure which represents what the work he did would have cost if you had got a builder in. He should also include the value of his parents’ contribution of a new kitchen. To work out the percentage share of any sale proceeds, after clearing the mortgage and selling costs, you divide your own total contributions by the figure for the total of both your contributions and then multiply by 100.
My final thought was that, in these low-interest times, the fact that you “invested all your savings upfront” doesn’t mean that you are entitled to a larger share.
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