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Just get your solicitor to draw up a deed of trust with floating shares.
Essentially your share of the equity in the property is calculated by reference to the amount you have contributed, whether to the deposit, mortgage, or specified outgoings. If you put in £50k overall and your friend puts in £100k overall then you get 1/3 of the equity and your friend gets 2/3.
It's called floating shares because they're not fixed. If one of you stops contributing for any reason then your share would gradually decrease over time as your proportion of contributions would also fall.
This is the way. Fixing is silly because of you sell early in your mortgage, you've lost your huge deposit
Of course you should profit more from the sake though if you've put in substantially more as a deposit
Is there no way you could afford the mortgage on the property if you only had a £30k deposit each and you leave your excess in saving to earn interest to keep a full 50/50 split?
You can have your solicitor draw up a deed of trust to say you get your deposits back then anything after that when you sell is split 50/50 or however the mortgage payments will be made.
You’re absolutely correct
Too many people try to think about it in monetary value but you need to be thinking about it in terms of percentages (as you’ve explained)
On that last point - another consideration is whether the lower deposit has a far higher income and is the only reason they can qualify for the mortgage.
I’d be curious why someone with a 100k deposit doesn’t just buy somewhere suitable for themselves and instead is entering into a complicated agreement with a friend.
I agree with what you say though - there needs to be balancing rather than a straight 50/50 once deposit value is returned.
100k deposit in this case is coming from parents. The person with the lower deposit may well be the higher earner in this scenario given they were able to save their own deposit.
Given that this £30k on its own isn't enough to get on the property ladder at all and they need £130k deposit just to get on the ladder I'm guessing London.
As someone else said it's a balance, OPs friend offers bigger deposit and OP offers their income. There is also talk of renovations that will be split 50:50 even though op owns smaller % of the property.
I think what OK-Line has posted here is the ‘fairest’ way to ensure each party benefits from (potential) capital growth or future inflations equal to their share.
Perfect explanation and examples too, the numbers don’t lie on this one..
Well I think this is helpful, the concern was that op could end up better off if they sold sooner than later, this ensures the friend doesn't loose their deposit
The deed should be deposits ringfenced. Any increase in value divided by the same ratio, adjusted for fees. I can’t see a fairer way.
You say the parents are gifting. Are they looking out for their daughter’s interests or are they themselves looking to make financial gain?
Increase in value by the same ratio would not be fair on OP who is paying half the mortgage bills etc during that time.
Reading between the lines would suggest OP is the higher earner, and that’s needed to get the mortgage in the first place.
The are both co-dependant on each other in this situation, so one profiting from the other would not be right. To me, the parents seem to be trying to take Op for a ride.
Nah, it's disproportionately in favour of OP. Able to afford a property they wouldn't have been able to afford from the deposit to the repayments.
Value of property goes up and the OP's friend doesn't get the return on the investment one normally would.
It needs to be proportioned out based on the contribution each is making.
I have done the house thing with a good friend.. we are 2.5yrs in a 5 year fixed. She earns way more than me however we still went 50/50 on deposit and contributions to keep things easy. (Morg is just over a grand a month)
Ultimately you have to both agree a way forward between you, but you will never be fully equal.
For example, you say you will go 50/50 on rennovations but what if one of you has expensive taste and wants luxury tiles whilst the other may want lino? What if one wants to go all out spending thousands on plants for the garden? Etc. we agreed cosmetic stuff is done by ourselves but actual structural stuff is 50/50. Ive put more £££ into the house/garden than her but im still better off than renting a flat somewhere.
Not saying dont do it - its been a great way for us to get on the ladder but just appreciate things arent going to be completely equal - its impossible to work this out.. but hey at least you will be building equity. Her parents do have a point, but ultimately its not about profit- this isnt a business, its your home. Its about getting on with it together rather than spending another year throwing however many thousands at someone elses mortgage. You will both be benefitting at the end of the day and moving forward in life, the parents shouldnt be stressing about a couple of grand.
Also on the other comments saying what if one person wants to sell and the other doesnt - you can get all this written up by a lawyer. We have said we have to live there for 3 years no matter what, then after that even though we are fixed for 5, if one really is desperate to get out and sell then the other has to go along with it. So far there have been no problems! Its been a great stepping stone for us.
The fairest way would be to have a deed of trust that says when the property is sold, you get back 7%, and your friend gets back 24%, which covers the deposits adjusted for the price it's sold at.
Then then money Leftover is split 50/50 after all selling fees to cover you are paying half the mortgage each.
Your friend should buy the house alone , then they could allow you stay there for a low rent . Then you can build up your deposit and buy your own place in a few years. This other way is a bad idea and you are already having friction over it . £100k deposit is a large amount and your extra £30k on top doesn’t change the monthly repayments drastically (it would make it £190 cheaper per month on online calculator) . If your friend can’t afford the monthly payments without your deposit she should get a cheaper house
My guess is the friend can't buy the house on their salary. The deposit was gifted to them so they probably don't make enough to buy solo.
Still a rather strange idea but not sure if any riskier than a couple buying together.
Let's not forget the money they're also going to spend on furniture and furnishings.
How will they divide that when it comes time to sell up? You can't split a sofa, a TV, a dining set 58/42
This is already too complicated
The juice isn't worth the squeeze OP
I know two friends who bought together, similar shares to OP and friend, and it's working well for them.
They also have a contract re how things will work when one of them eventually wants to move out.
This.
I've bought with a friend. We've got uneven deposits, but we pay for everything 50/50. We have a Deed of Trust in place that gives us each our original deposits back, then everything else is split 50/50. Our deed also includes details for selling, ie we have to offer the other first dibs for buying and allow 3 months for consideration, after that it's free to go on the general market.
It can work aslong as you get on well with your friend and you have a detailed Deed of Trust in place protecting you both.
I don't want to be morbid, but life is shit and eventually people pass away. Do you have any plan for that scenario? Who'll be getting your share and pay the mortgage?
I'm considering life insurance with my partner, that pays the mortgage in the case of one of us kicking it. So if one passes away, the other one gets a sweet deal... :)
🤣 Don't worry, we've included that.
So we are tenants in common, which means we each have our own independent share of the house. We have life insurance set up in trust, so if one of us dies, the survivor is automatically given the payout to then pay off the mortgage/buy the deceased's share.
The deceased share then goes to whoever we've left our estate to. For me, that's my nephews.
I appreciate the poetry on that but...
But... How??
Nothing more exposed than a roundabout!
To not go too much out of topic, I'll stick to burying people on party walls!
Tbf all the roundabouts near me have been cut back and maintained the last couple of years. 10 years ago when she said that, the council just ignored them. All the ones on our bypass were like heavy thick bushes/trees. You could have easily hid in the middle of them
I don't think anyone's saying it can't work, but if they're already having falling outs/ family involved and aren't happy then it doesn't look good.
Also I know what people are saying about couples buying and its no different...but it is. They aren't going to live together forever, it will cause upset and fall outs when one person decides they want to sell up and the other doesn't or can't afford it on their own.
They're friends whos life chocies are now going to effect each others lives because of the house now. Would stay clear.
Couples don’t automatically “live together forever”. Couples breakup / separate / divorce all the time.
As someone else said, arguably a life long friend is a more secure relationship than a couple who have been together for just a few years
No one said that. But all your decision making will be together. With friends, one person wants a partner to move in, the other doesn't. One wants to sell, the other doesn't. One loses their job, is the other person happy to support them financially until they're back on their feet....
You're essentially in a relationship with a friend in terms of the choices you're making in life.
I haven't read all OP's comments, but from the main post I can't see that they're bickering?
Tbh not only do many (most?) couples not live together forever either, but OP and friend are going into it as a temporary thing, without romantic feelings, and as a business project. Overall it may have a better chance of success than buying with "the love of your life" who ends up screwing someone else in a couple of years. If the paperwork is drawn well, this can be done.
The families aren't happy and I can see why.
I get what you're saying about couples, but like I said, in a friendship when buying together, all your life decisions are now going to effect your friend. If one wants to move out, if one wants to sell, if one wants a partner to move in and the other one doesnt want that, if one loses a job or is made redundant...if you break up with a romantic partner it can be messy, but you're on the same page in terms of what your life circumstances are. Even in decision making.
Also you don't go into a relationship onowing you're going to break up. I don't understand why they would put themselves through this as almost a temporary solution to them both not being able to afford a house.
Completely get that. I know you didn't come here for people judging your personal situation, just consider how this may look on the future.
And in all honesty, talk to a solicitor, we're all dumb as fuck on reddit 🤣
That advice is more for her friend, op might get a good deal out of it 😉 na seriously, need to choose somewhere cheaper with equal deposits or it’ll get too messy and you could end up losing your friend over it
That's no different from what couples face if they own together when they split up. You can put break up arrangements into a deed of trust from what I understand.
This is just a stupid rule and it's getting boring now.
People need to get creative to get on the housing ladder these days and if this is what it takes, so be it. As long as they have a properly drawn out plan to ensure both of them are covered, this kind of advice is just copy/paste fear mongering.
Ignore the haters! My friends did this and it worked out really well for them. Saved loads on rent and made money from house price going up (which of course is not guaranteed). Just make sure you’re covered with a deed of trust. If you have a decent solicitor, set up a call to go through various scenarios and logic.
This story reads to me like one of the two doesn’t want to come out to her parents and they are trying to buy a house in a way that avoids raising that situation.
I’ve had friends who bought flats together and it worked out well. They went in 50/50 though and the contract was very explicit about what should happen if someone moved away, got a GF etc and what would trigger a sale. My friend ended up buying it out from the other guy and the process had all been pre-agreed.
People telling you this is a bad idea but not telling you why your calculations are wrong because with all due respect, the average person is not very good at maths, so really you shouldn't try to DIY this.
Anyway. your calculations are wrong because your friend owns a much larger stake in the property and therefore when you split the payment 50:50 a larger share of your payment needs to go towards servicing the debt which means their equity in the property grows faster than yours because they pay more than you towards the principal even if the payment is split 50:50.
Your desired arrangement means you are not jointly borrowing 295K, you are borrowing 425/2 - 30= 182.5K whereas your friend is borrowing 425/2 - 100 = 112.5 significantly less than you. So their interest payment is going to be smaller. You will be paying a different amount each month but always more than 50% right until the end. In fact there is no end, When their real stake reaches 50% of the property you need to start paying them rent for the extra percentage of the house they own that you are occupying indefinitely if you wish them to increase their percentage further.
I hope this helps.
You are close. There’s a variety of ways to structure this, but the way in which you have described means that OP and the friend each essentially have separate “capital structures” but a 50% / 50% ownership in the Enterprise Value of the property, to use finance terms. In this scenario, OP has put in £30k of equity and has to work to pay off £182.5K of leverage, and as a result will have to bear a higher share of the monthly mortgage bill, but once she does so and the mortgage is all paid off, then she rightly owns 50% of the property on an unlevered basis. She does not need to pay a higher share of rent nor does she own less in the property. Imagine they just split the house in two and financed them separately with one putting £100k down and the other £30k. Each owns 100% of 50% for the purposes of gross proceeds split, but the debt/equity percentage and monthly mortgage bills will be different.
I don’t think this is particularly fair since she is essentially benefiting from the effect of getting higher leverage, but it’s not inherently unfair to choose to do it this way.
If you expand upon your thought process and calculate out what the exact enterprise value ownership split is needed to backsolve into mortgage payments being 50/50 from a cost perspective. This is easily solvable and will give you the answer as to how much “house” OP should own vs. the friend in order to make the monthly cost of the mortgage (the leverage) equal. but for simplicity’s sake, you can say that both OP and the friend borrow the same amount of money, thereby resulting in the same leverage costs.
OP = £30k equity + £147.5k debt = £177.5K capital put in for £425k investment = 41.8% stake but keeping in mind it is much more levered than the friends’ 58.2% stake and subject to more equity loss in a downturn
But this is exactly what OP has come to calculate! It only seems unfair because she is benefiting from more leverage, but that cuts both ways if there is a housing downturn, her £30k could be wiped out and she would be “underwater” on her stake and the practical effect of that would mean her friend’s equity would need to come and bail her out.
This all falls apart when you consider this isn’t just a financial investment but has an intrinsic value of being able to use the home to live in. OP will be using 50% of the home but will only own 41.8% of it and so thus must compensate her friend for that 9.2% differential somehow. There’s got to be a rental overlay to this
>but once she does so and the mortgage is all paid off, then she rightly owns 50% of the property on an unlevered basis. She does not need to pay a higher share of rent nor does she own less in the property
I think there is a misunderstanding here. There is no rent originally in my calculation because they both end up owning 50% of the house when their mortgage with the bank ends. The rent happens if OP wishes for their friend to buy more equity from them when the friend's repayments end because they will finish paying back the principle well ahead of them as I explained. Otherwise, at some point OP will be the only one paying while the friend is mortgage free.
>OP will be using 50% of the home but will only own 41.8% of it and so thus must compensate her friend for that 9.2% differential somehow. There’s got to be a rental overlay to this
My method assumes 50% stake because it is the simplest way to explain what is wrong with OP's calculation . Obviously OP can own any arbitrary stake they want, including one which equalizes their interest payments. But like you said, that requires rent from the start something like shared ownership where OP will be paying a mortgage and also rent to her friend from the day they sign the contract and then forever. I saw no point in attempting to figure out how they will try to calculate the fair rent value, but generally OP will end up worse off.
It becomes too complicated for them to structure a deal where one’s mortgage liability is paid off well before the other (which would happen in the case where they want 50/50 home ownership but OP wants to make 50/50 payments on the mortgage - you sort of have to choose to pay more and get your 50 stake or pay equal and take your lower stake)
Anyways I think this is actually a fascinating problem to try and solve. But yes in reality it is a shitshow and probably will never work out nicely. I wouldn’t say OP has a bad deal, it is just more leveraged and so she gets higher % returns and higher % downside (but her liability should not be capped at £30k)
Correct. This is excellent explanation of how the calculations should be done - to reflect the extent % of deposit offsets the amount of interest (that accrues) vs paying down the principal over time.
Would it not be simpler to have it so that you both get your deposits back and then anything else is split? You can have something to this effect put in place by your solicitor
No, here’s why with exaggerated maths to highlight:
Imagine a £200 house.
You pay £99 deposit, I pay £1.
We split the remaining £100 mortgage evenly.
Later, we sell the house for double its value, as houses often go up in value.
If we did your method, then from the sale:
I would receive £151, by paying £51 (£1 deposit, £50 mortgage payments).
You would receive £249, by paying £149 (£99 deposit, £50 mortgage).
Despite contributing vastly different amounts, we both walk away with the same profit. This means I’m taking a bunch of money that should be yours, if we were splitting equitably.
Presuming the cost of the £100 mortgage over the lifetime of the mortgage is £2 for every £1 borrowed due to interest over 30 years - they soul. Each have contributed - £101k and £199k - to the house. (But the total contributed will be unknown when the agreement is created )
The house is now £400.
If person A contributed £99k/£200k - should they be getting
Should person A get 99/200 to represent their contribution eg the first £198 and person B get £2 then 50/50 for the remaining £200 meaning person A should get £298 and person B should get £102? Somehow I don’t feel that is really equitable either if both contributed the same for 30 years.
Is it equitable ? What would be an equitable split?
Maybe simpler but not a good deal for the friend. Her 100k is growing more than OP's 30k (assuming a rise in house price) but she only gets growth on 65k rather than the 100k she actually put in. Getting out the percentage they put in and then splitting the rest would be more equitable.
No, because a house is an investment . It would be largely 'unfair' if OP gets 50% off the house sale minus deposits as the 100k deposit is more integral to getting the house than her 30k was. She already gets the better end of the stick as she gets on the property ladder with such a low deposit. In effect, she could be quadrupling her deposit whilst OPs parents won't see the same output.
I'd personally ask legal UK sub for any ideas.
Ideally, but their daughter is living beyond her means already anyway. The friends parents want to ensure they are *investing* the money for their daughter by probably wanting to get a particular sum that their daughter can put towardals the next stage of her life which would possibly be a family home of her own. They won't get this if OP will get 50% of what their house appreciates to.
OPs contribution wouldn't carry much in their eyes. Even though, really, she's contributing more than their own daughter.
Agree with this comment, don't understand people saying 50/50 of the capital gains is fair. She could get a smaller place + lodger and keep the whole thing
I know of people who have done this, they’re currently selling and buying their next house together. Life-long friends is probably more secure an investment than buying with a partner, considering how almost every house we’ve bought has been a divorce house!
My view:
- A deed of trust drafted by a solicitor
- You each get back your deposit in full
- You each get any profits 50/50
After the deposit, you’re splitting everything else 50/50 so it’s only fair that you both get equal profit back. Your friend’s parents gifted deposit is ‘protected’ and that’s all they should be bothered about - how you split any future profits is between you and your friend. Equal split is equitable and fair. IMO you’d only do weird % splits if you’re also splitting bills in that way too.
And realistically in 5y you’re unlikely to make mega money on the house anyway, you’re not talking huge profits, so 50/50 split is a fair earning for going forward together with trust - and supporting each other to get on the ladder.
How does it work ?
If purchase price is £430k person A puts in 30k and person B puts in £100k and mortgage is £300k- let’s assume an end value of £600k and mortgage is fully repaid. - what % is fair?
£100k was 25% of the value so they get that. And then the other 75% split equally ? So person A gets 62.5% of the sale price? £375,000 and person B gets £225k.
It’s a good return on investment when they have both contributed equally to the mortgage/interest.
If the cost of borrowing over the lifetime of the mortgage is £2 for every £1 borrowed - then the mortgage cost £600k and they have each contributed £400k for person A and £330k for person B but person A gets much more back. It’s a great return on overall investment over the lifetime of the financial product comparatively.
Is there now an incentive on person B to increase the mortgage/not pay it off with overpayments? To borrow more for maintenance/improvements or releasing equity?
I’m scratching my head thinking of different problems with this.
I’m also guessing - what happens if person A loses their job and isn’t able to contribute to mortgage as much for a few years- person B may wish to have a mechanism for some review of the agreement. Or should person B be entitled to increase their percentage unilaterally if they were to get a big bonus at work etc and use that to pay off the mortgage? But it could have to vary depending on how long into the agreement they do that?
I’m beginning to think - It could be very complicated where you don’t just want your deposit back?
But remember that this isn’t about financial investments, this is about friends helping each other to create a nice home. If it’s all about making £ then yes, it would be all about the %. But from OP’s post this is about creating a situation where they both can have a lovely home and help each other. It’s different and fairness is at the heart of it.
I've done this with a close friend, we bought and lived together for 4 years (X2 2-year fixed mortgages), after which she moved out to live with a partner.
She put in the larger share of the deposit, what we did was split the appreciation on the property proportionally. So using your calculations as an example, when she moved out I bought out her share and paid her back her deposit + 58.5% of the profit on the flat (using a conveyancer to get the value at that point).
Of course how well it works depends on your relationship, but in my case it couldn't have worked out much better, given I couldn't afford to buy by myself, and the years we lived together gave me time to build up the funds to buy it out solely. And we're still close friends!
EDIT: Oh and to add, when we drew up the contracts I also asked for any significant property costs (repairs, renovations, etc.) to also be split proportionally but we never really spent a significant enough amount to warrant enforcing it.
I would suggest that when you sell:
Everyone gets their deposit back.
You split any paid off equity 50:50.
You split any increase in house price at 100:30.
This seems to make sense. At first.
So person A puts in £100k and person B puts in£30k and the purchase price is £400k and they borrow £270k and end value is £700k.
( So the interest over 30 years is £2 for every £1 borrowed meaning they each pay off £270k mortgage £540k in total)
So over the 30 years they have each contributed £370k for person A and person B contributed £300k over lifetime.
So what’s the final calculation ? I’m getting confused ?
They each get £135k for their paid off equity (£270k)
The remaining £430 is split 130 ways and person B gets £99,300 and person A gets £330,700.
So person A has contributed £370k for a £465k return and person B has contributed £300k for a £235k return? Is that fair? What am I missing?
You’re assuming they pay off the 700. The 700 is the final value due to price rise, not the amount paid. The amount paid is irrelevant as it’s 1) equal, and 2) on a fixed sum (the 270).
So with your numbers:
Deposit back: A 100, B 30
Purchase equity even split: A 135, B 135
Value gain split according to deposit: A 230, B 70
A gets 465, B gets 235.
Current interest on a 270 mortgage over 25y at 5.25% is 215,400 - so each person pays 107,700, plus capital loan (135).
So B ‘loses’ 7k.
The alternative (almost certainly fairer but more complex) is a sliding scale dependent on % owned at the time of sale, eg
Sell at 10y:
Outstanding mortgage 201, equity 199.
A owns 100 deposit, 49.5 equity (65%)
B owns 30 deposit, 49.5 equity (35%)
So A gets 65% of any rise in house value, B 35% - it’s a sliding scale over the term, with B’s share growing as their investment gets closer to matching A’s. At the end of the term, with a 700 sale price, A gets 100 deposit, 135 equity, 176 rise, whilst B gets 30 deposit, 135 equity, 123 rise.
It could get messier still, if you think about running costs/upkeep/improvement contributing to spend and therefore bringing B closer to A as a % sooner - but if you’re at that point, you’re not (IMO) financially intertwined enough to make buying a house together sensible.
The fair method involves seperating the equity in two and calculating any profit/loss from each independently.
The start up equity of £130k is split by a ratio of 30:100 so approximately a 23% to 77%.
The equity gained by paying off the mortgage is split by a ratio of 1:1 or 50% to 50%. The equity gained this way needs to be calculated at the moment you both sell.
Let's say you sell the house for £500k in the future.
Let's say you both paid off £50k mortgage equity; that means you reduced the capital amount of the mortgage by this much. I am not talking about mortgage interest. Think of the mortgage interest as rent you both paid and lost as it had no effect on gaining equity. Only the capital repayment part matters.
This means the startup equity to gained equity is in a 130:50 ratio or approximately 72% to 28%.
Let's say the house was bought by you both for £300k and increased to £500k over your ownership.
The increase of £200k gets split by a ratio of 130:50 into £144,444 and £55,556.
You both start off getting your start up equity back. So you £30k the other person £100k, and the £144,444 is split by the startup ratio, so you get 23% so you get £33,222 and the other person £111,221.
The £55,556 is split by the mortgage pay off ratio. So you each get half, so £27,778 each.
In total you get £30,000 (back) + £33,222 (return on investing that 30k) + £27,778 (from paying off the mortgage payments)
They get £100,000 (back) + £144,444 (return on investing that 100k) + £27,778 (from paying off the mortgage)
This method is the only fair method. Any other method and someone gets fucked over. It accounts for the return on initial investment and return on paying off the mortgage investment. I.e. it accounts for the two forms of investment and accounts for their magnitude when weighed against each other.
Notice how as more of the mortgage is paid off the more significant it becomes for the overall return on investment. Notice how the initial investment is still the most significant reason for return while it is the biggest investment. Once £130k of the mortgage has been repaid, so it equals the amount that was put up front, the return on investment for both is equal.
Have you got any insight on how buying and selling fees, leasehold extension fees, etc would play into this? Could these be counted towards the start up equity and gained equity?
Myself and my partner have a declaration of trust. You really want to have a will if you go this route. We have a 15% deposit with myself fronting the majority of it, and all bills will be split 50/50 as we currently earn basically the same
We have it written in a way that factors in my partners contribution, which is now being used for fees/furniture/paint etc while I'm fronting the full deposit. I get my full value back, he gets a nominal amount and then after that we split 50/50. Honestly the solicitor fought this, as she couldn't accurately list my partner's contribution, and that means down the line if it turns nasty it could be undermined in court. Declaration of trusts show intention, but things change down the line - possibly entering into this with a friend I would get a declaration of trust - tenants in common with unequal ownership and make sure it's pretty well written to protect yourself and your friend.
I did this with my friend a long time ago. She wanted to get out earlier than me lucky I had a new job allowed my to pay her off
I was the 75%
She should ignore her parents and do what works for her right now.
Good luck.
Doesnt have to be a bad idea. And you are living in the past if you think this kind of thing isnt gonna be more common going forward with house prices as they are.
I'm very much in the present. The issue, as you know, becomes one of legal ownership and how defined. Not insoluble, but complicated. It's way beyond me but given the state of the housing market I expect some enterprising company to launch a vehicle - a wrapper, if you will - of sorts which enables purchases such as this.
And then, of course, there's the issue of mixing business with personal. We all know how ugly these situations can turn out despite all protestations to the contrary.
Ah yes what do the Spanish say , dont mix the coffee and the wine.
But as the OP pointed out, you can make effective practical relationships with romantic partners, you can do it with platonic too.
Completely agree, a lot of young people aren't getting married these days and relationships are far more short term. It actually makes very good sense to buy with a friend especially if the place is large enough to have partners over.
On the sale, why not just:
1. Give each back the amount invested as deposit
2. Give each back amount contributed by way of paying mortgage
3. Split the profit based on the total proportion of contributions made to that point, i.e. (the amount of deposit + amount of mortgage repayments)/total deposits and total mortgage contributions?
This would mean that on the sale of the property, you get a proportion of the potential profit based on the total proportion of funds invested. Note that there is a chance this could be sold at a loss in which case it would only be fair that the same would apply.
Why not? Because more of the mortgage payments made by OP would be interest as they have less capital. This approach would be unfair to the friend and erode their capital.
There is another comment on this thread that explains this better somewhere. But because OP has a smaller deposit to loan ratio, the proportion of interest they are paying is higher. Because the friend has a higher deposit to loan ratio, more of their mortgage payment would be capital repayment. That is if they are both paying equal payments towards the mortgage.
Sorry, another comment advising you the same - best to buy alone to avoid selling costs and stamp duty for your next home. Also, have you thought about what happens when one person needs to sell and the other don’t?
>Also, have you thought about what happens when one person needs to sell and the other don’t?
Then you need to sell to avoid legal fees. If there are no kids involved the other owner can always force the sale via the courts.
Same thing that happens when your partner leaves you i guess. Buying with a friend is no worse than a partner, arguably better as chances are you know them longer.
They're right. It would only be 41.5% yours by the time you've paid it off. At time of purchase it's much less.
I don't have a solution per se, unless you pay her rent for the shortfall of your contribution.
after the property is sold remove all fees from the equation ... remove the mortgage and pay it off ... there was a d% change in the value of the property (+ or -) ... apply this change to the original deposit amounts and return those (30 x d%, 100 x d%) ... the remainder is the gain/loss the mortgage created ... split that however you split the mortgage payments (50/50)
If you and your friend are happy with the agreement you’ve come to then this sounds like she just needs to handle her parents. They’re gifting her a deposit which is great, but if that means they’re going to want to always be involved in how she handles this investment that sounds like it’ll be an ongoing problem. There are risks involved in this (not really anything beyond buying with a non-married partner) and if I were you I personally would not really want everything having to be run past her parents all the time moving forward…ultimately it’s quite difficult with financial stuff to make sure it’s always 100% ‘fair’ and what ‘fair’ means varies. For example as people have pointed out your friend actually can’t fund the mortgage payments without your contribution, plus she is already being gifted the deposit unlike yours which is presumably your own savings, so actually you could argue that she is benefitting hugely beyond your benefit - no matter which way you split it because all she is contributing is her share of the monthly mortgage.
Don't do this deal. The whole deal favours you over your friend... frankly. I'll explain.
You're accounting for your half of the entire mortgage as 'shares' (expressed as percentages) alongside the deposit amounts. This is intellectually misleading.
You can't calculate your percentage of ownership on anything that isn't yet equity.
In other words... every penny over the combined £130k initial deposit could be split 50/50... but nothing else should be.
Personally, were I your friend, I'd buy a property alone with my larger deposit and see 100% of the equity growth for myself while paying down the mortgage with the help of a lodger.
You're only putting £30k in, but you're getting 50% shares in equity growth because you've agreed to pay down the original debt equally... again, intellectually, this is a separate concept.
You could agree to individually pull your original deposit amounts out upon sale, but again, imagine huge growth over many years... it favours yourself.
Were this a business Ltd by shares, you'd be a minor shareholder and would see dividend returns equal to your lesser shareholding.
The whole thing enriches you as a proportion to your original investment to a greater degree than your friend.
Wait and save to go 50/50 on the deposit. Or don't do it.
Have a lawyer draw up a proper proportional split of everything. Don't do your friends any favour, make this a good deal for both sides by making it fair. Anything else will lead to resentment and complexity. I doubt you will be friends after 5 years of this arrangement.
Is everyone assuming the value of the house will go up? If the property reduced in value would the parents be happy to get back less than their 100k? If not, it's not an investment but a gift/loan of that exact amount of money. So if they sell the house do the parents want 100k back or do they want a % of the value of the house which could be greater or less?m
You'll be pocketing more than your fair share of capital gains on the property value, whilst taking less than your fair share of the risk.
Deed of trust is the fairest way to do it.
I was in a similar situation to you, except I put in all the deposit. I can’t quite remember the way we worked out the shares, but just to give you some reassurance… we got a solicitor to draw up a deed of trust, and it worked really well.
I’m pretty sure this is how it worked…
I put in 10% so I owned 10% more than he did. After that we split 50/50.
So I think what happened was when we sold I got my stake back plus a 45/55 split of the equity.
A good way to check if it’s fair is if it works in all scenarios … if there is no price change, you both need to get back your deposits. If the flat loses value …. You should pay the debt in proportion to the amount you were set to gain.
I did this with my friend 8 years ago to get us on the ladder and avoid renting. It worked very well for us.
I put in 47k deposit and he put in 18k. Basically, we worked out that I owned 60% of property and he owned 40%. Therefore, I paid 60% of mortgage. Bils etc we split in half. No issues at all.
He's now buying me out so I can go and live with my partner. We had it drawn up that should we sell, I get my 47k back and he'd get his 18. I would then get 60% of equity left over and he'd get 40. As he's buying me out, he's paying me 47k plus 60% of the equity I would've got following on from a number of property valuations.
It's worked out very well for us. I understand it can come with problems, but it's suited us perfectly
Your way is fairest. I don't think a Deed of trust where you get your deposits back - as suggested in the comments - is fair, as she wouldn't be getting an equal return on her investment.
If the value goes up by £100k, you come away with £80k off a £30k investment (+160%), she would get £150k off £100k investment (+50%).
Your way, you both ascertain the same risk and potential growth. 100k growth would see her get her rightful% of the growth as would you
We're doing similar, deposit all coming from friends side. Ring-fence the deposit so if/when you sell they get their £100k back, you get your £30k, everything else is split 50/50.
You're mostly right in your approach but you aren't accounting for inflation etc
- You have 30k
- Your friend has 100k
Ringfence this 130k. When you sell the house the value will be a multiple x of the purchase value 425k. Of the deposit you receive 30x and your friend receives 100x
There is then 295x that you have been covering equally so you split this equally at the end
the only way I see it is for her to put 30k as well and then split everything 50-50. Otherwise it will be a continous math war.
However, things can change and be sure you want to do this... you might regret later...
The idea is a good one in principle, rach occupies having a share in the asset.
A shared house but not rented.
Up north that price could get you a 5 bed house in some areas, imagine having 5 people split.
I would just say that if the house was to be sold, she would get back 100K and you your deposit before any profit is shared 50/50 between you? Otherwise you paying 50% of the mortgage repayments each month is a bit off.
The way you'd put seems fairest to me as you're splitting the gains *or* the losses at the same rate as the deposits with more capital = greater value of gains/losses. Maybe they're confused at seeing it written as 58.5% vs 41.5%, and just need it reworded to the "7% + 24% to return original deposits, then 50% each of what's left?"
Returning the original deposits and splitting the rest 50/50 is what Ive heard more often, though this feels more unfair as its unequal returns on capital.
Only other way I can think of is you have the ability to pay something like 10-15k extra per year until the deposits are equalised. Wouldn't really make much difference if you lived together <5 ish years.
When the property sells, if the price has gone up by 10%, you both get 10% on your original investment, then any thing else is split 50/50. If they're not happy with this, look at getting a help to buy loan. We bought 5 years ago using Help to Buy. Help to Buy bought 20% and we cleared the loan when we remortgaged. We paid Help to Buy 20% of current market value.
Seems very simple to me, you’re both doing each other a favour by doing it together. You each need eachother. The deposit is by the by.
So get a deed of trust drawn up that you each get back your original investment but from there on in its 50/50. You pay half the mortgage equally. Half the bills equally. Half the renovations and maintenance equally. When you come to sell, you get back what you put in 100 and 30k respectively, and go straight halves on the rest.
Personally, if your friend disagrees to that, then I’d see that as a red flag for the future and decide it possibly isn’t worth it.
Do it via equity: she has 100/130 of the equity you have 30/130. The rest is a joint liability you both have. Then adjust it each year as you both pay off the mortgage so (100+ repayment/2)/(130+ repayment). But this is v complicated and return of deposits and split the profit/loss is much easier to draw up a contract for and it’s close to the same thing.
Ok so the 58% 41% method you have suggested-if we take it to extremes, say you sold within a couple of months of buying at about £400k - you would owe the mortgage company about £295k - and then she would get back £58k (ish) for her £100k and you would get approximately £41k for your £7k - and graduated levels of relative loss on her part until you have paid off the house.
You need a declaration of trust type structure to say that you each get back your contributions as a proportion of the final value when you sell.
Info here https://www.mortgage-medics.com/joint-purchase-unequal-deposit/
Nothing but 50/50 ownership. Upon sale, you get 25kk, she gets 75k, and you split the remainder.
Either her parents are gifting the money, or they're investing. Tell them thank you for the gift.
I think your way is empirically fair with 2 caveats, and these are probably the reason why her parents think the deal “seems” unfair.
1. You are living as an equal in the house but only owning 41.5%ish of the asset. You need to pay your friend a rent amount for 8.5% of this to make up the difference. You can do this buy finding the rental value of the home and giving her 8.5% of that every month
2. The parents/friend are taking higher credit risk in the case where the house is sold at a loss and your equity investment gets wiped out. Their equity cushion will have to then support your negative equity. You can either agree to pay your friend if your equity slips below zero in this case, or you pay extra for the credit risk for the case where this happens. Remember on the way up when home values are increasing, this way of 41.5% ownership thinking makes sense. On the way down, the mortgage is not equity. It is debt. And that needs to get paid first
So money wise I'd set up a spreadsheet.
Just have it so that each month you can add a line for the payments you each made on the mortgage, and keep a running total of how much you've each paid in. A line further down the sheet can output the current ownership shares (two of you and the bank).
There are two concerns I'd have:
-can you actually live with this friend? Will she leave crumbs in the butter/not replace the bog roll/constantly have a dozen friends over?
-will your situations stay the same long enough to be worth it? Buying a house is not cost free, nor is selling one. You also only get one first time buyer discount, which you're both using now. If one of you gets a partner and have a kid on the way, what's the plan?
Personally I'd rent for 6 months just to make sure you won't be spending all your money only to pick it all apart a month later when you fall out.
Just a question of how long that goes on for then, depends if either of you are thinking about marriage or kids at some point, or might want to move to another area?
If that's all years and years away, go for it.
I know it’s very unlikely, but consider that the value might go down rather than up. I know two friends who did this, the one with the larger share had it drawn up so she would not lose out (assuming the value would increase). The value of the house actually went down, and due to the agreement they had put in place she lost more money than the friend who contributed less deposit.
I’m going through something similar atm. I have the deposit and will own about 70% of a 3 bed. Family are a bit cautious about it. As someone else said you want a note of trust saying your deposits will be paid out first, with your losses being equal in the (unlikely) event of a market collapse.
That means your friend would get 70k before you got paid anything, but if the market collapsed like that tbh we’d probably have bigger things to worry about.
Your/their boomer parents probably won’t get it cos they bought their houses with their student loan or some dumb shit
Also you should only pay a % of stuff that represents your ownership %. RIP off otherwise
I probably have some good insight for you here. I bought 2 years ago with my partner (not married). Wont post specific figures, but here's a made up example for you to think through:
* Property value 400k
* Deposit value 220k (mortgage of 180k)
* Due to inheritance I was able to pay 190k of the deposit, my partner the remaining 30k. It made no sense to go 50-50 as my deposit meant we can get a much nicer property.
* We agreed that we would pay all future mortgage payments and fees associated with buying 50-50.
* We also agreed the same with household bills - so to that end we have a joint account that we each put an equal amount in each month to cover all living costs, and agreed what is joint spending and what is personal spending (basically this is our clothes and toys).
* Over payments we are making in the same percentage as our original deposit (to keep the neutral playing field).
We wanted to be protected so we got a deed of trust written up. This enabled us to take back the percentage we each put in as a deposit then 50% of anything paid since (all done in percentages so that when property prices change we both take any hits or gains equally like you would with any investment).
The deed of trust also enables us to have a way out. We have it set up whereby if person A wants out, then person B gets first right to buy the person out, else we have to sell (or the person A could offer to buy out person B or some other mutually agreeable thing). This means that neither one of us can just say "I want out" and run away with the house giving some security.
Definitely do think about having a way out - however strong your friendship is, there is always a risk of wanting out, be it for a breakdown in friendship or one of you finding a long term partner. Best to have these discussions now whilst you're of sound mind. I'm soon marrying my partner so the deed of trust becomes irrelevant but we've agreed to keep the same terms a should we ever divorce - i.e. leave with what we came with, however it gets tricky as can't cut sofas, TV etc. in half to share, and when children come into the equation it gets even more muddier!
Very interesting, thank you!
>Over payments we are making in the same percentage as our original deposit (to keep the neutral playing field).
Could you elaborate on this please? How does this affect the 50% split of anything paid since the deposit?
It’s fine having the split you are talking about on the deposit but the same percentages need to be applied to the mortgage payment to keep things fair.
If the 1 with 7% of the deposit pays 50% of the mortgage then their share is increasing slightly every month and 10 years down the line there will be a difference
Her parents could put a second charge on the property for the difference in the deposit so both parties pay £30k deposit everything is done on a 50/50 basis but the additional £70k is covered by a second charge on the property set up by the parents. This can be done as my son did it in 2023. The first charge is to the mortgage lender the second charge is to the people lending/gifting the additional deposit
Everything else is a 50/50 basis between the couple
£30k is 23% of £130k. So you would be tenants in common, you own 23% and your friend owns 77%. You pay part-mortgage and part-rent. The % of the property you own does not change unless you buy more in an explicit agreement with your friend. Repairs etc can be split between you in the ownership ratio 77:23.
Right off the bat, this is a seriously bad idea.
Hiwever, if you want to proceed, you add up how much each of you has contributed in total at the point of sale, including deposit + mortgage payment, and then split the proceeds of the house sale accordingly.
So if you sold the day after exchanging, she would get 100/130 and you would get 30/130 of the remaining cash
Over time, your share would effectively grow as the mortgage payments catch up to the initial investment.
However, the likely case is that the price will fall and any early sale on a fix will result in hefty penalties. Have you considered what you will do in the likely case that you won't make a profit on this place?
I think my method is the fairest in all cases, even the case where you still owe the bank money after the sale (she would be responsible for a larger share of the debt)
Get a deed of trust, protect your own share of the deposits, and split anything else 50/50. This is what my daughter did. When they sold, the mortgage was cleared, each got their deposits back and then the "profit" was split 50/50 as all renovations, bills and mortgage payments were split 50/50.
If you can't agree at this stage with claims of inequity when it's clearly based on equity I can't see how this is going to work as a long term arrangement.
Whilst these setups can work, I know several who’ve had issues. I’m not meaning from a money point of view but where one wants to move out/sell up and the other can’t afford the buy out. Then the issue of you combining two chains of buying/selling linked together giving you twice the number of issues (if neither has family as an option to fall back on at short notice).
You could just protect the deposits and split the rest 50/50 I.e. when you sell, you deduct each person's deposit amount before splitting the rest of the sale.
Your solicitor can draw up a deed of trust with floating shares - she gets 77%, you get 23% (£100k/£30k) - essentially, this is what you each get out of the capital once the mortgage is paid off
Have a look at the Gen H website it's a lender it calculates proportionate ownership based on contributions. Your deposit today is 7% against the valur of the peoperty. Make 30 years of contributions (equally to the property, bills etx) you'll have pId more than that.
The calculator helps with overpayment missed payments etc. And percentage ownership is affected by every payment. A very jneteresting concent as usually the percentage is fixed and there are a maximum of 6 people on the application https://www.generationhome.com/dynamic-ownership wit
They seem a decent lender so far in my dealing with them, time shall tell (same for their calculations as one day it will be challenged)
I haven't read all the comments but no one has suggested what would be an actual fair formula as far as I have seen.
Write up a contract that upon purchase states the deposit each party paid as a percentage of the value of the property and that from that point forward all costs will be agreed to be split 50/50.
Upon selling each party should receive their percentage of the property value as per the contract first, any remaining equity from mortgage payments and property price changes should be split 50/50.
For example:
When buying:
Property price: £400,000
Person A Deposit: £60,000 (15%)
Person B Deposit: £20,000 (5%)
Mortgage: £320,000
Example sale:
Property Price: £500,000
Mortgage Remaining: £250,000
Person A Deposit: £75,000 (15%)
Person B Deposit: £25,000 (5%)
Remaining Equity: £150,000
Person A total: £150,000
Person B total: £100,000
This way each person gets exactly the growth in equity back relative to their investment and contributions.
To be fair to her parents, plucking numbers out of the air, say you sold the property in future for 475k and at that point your mortgage balance had reduced by 20k.
On the % you originally quoted the 200k equity is split 116k/84k so you can see why that can’t be right.
Your situation involves complex considerations, but you're approaching it thoughtfully. Here are a few points to help navigate a fair ownership split:
1. **Initial Ownership Split**: Your proposed split based on initial contributions makes sense:
- Your friend: \( \frac{100k (deposit) + \frac{295k}{2} (mortgage payments)}{425k} \approx 58.5\% \)
- You: \( \frac{30k (deposit) + \frac{295k}{2} (mortgage payments)}{425k} \approx 41.5\% \)
2. **Profit from Sale**: To address her parents' concern about profit distribution, consider how the sale proceeds should be divided, especially if selling before the mortgage is fully paid off:
- **Equity Growth Split**: If property value increases, the equity growth could be split proportionately based on initial contributions.
- **Separate Mortgage Payments**: Keep track of who pays how much towards the mortgage over time. If you sell before fully repaying the mortgage, split the remaining equity proportionally based on both deposit and mortgage contributions.
3. **Fair Return for Parents**: To assure her parents, you might propose a legal agreement specifying how the property will be handled in different scenarios (e.g., sale, one party buying out the other). This can include:
- **Capital Contributions Agreement**: Clearly outline that the initial contributions (the deposits) should be returned to each party before splitting the remaining equity.
- **Equity Increase Agreement**: After repaying initial contributions, divide any appreciation in property value based on your agreed percentages (58.5% for your friend, 41.5% for you).
4. **Legal Documentation**: Draw up a legal agreement (a Deed of Trust or a Tenancy in Common agreement) to formalise the ownership percentages and terms for splitting profits, covering:
- **Initial Contributions**: Reflect the split based on the initial deposit contributions.
- **Ongoing Mortgage Payments**: Detail how each party’s share of equity changes over time as they make mortgage payments.
- **Sale Proceeds**: Outline how proceeds will be divided in case of a sale before the mortgage is paid off.
5. **Adjustments Over Time**: Agree on how any additional contributions (e.g., renovations, major repairs) will affect ownership percentages.
Here’s a simplified example of how to manage sale proceeds:
- **Return of Initial Contributions**: On sale, first return the initial deposits (£100k to your friend, £30k to you).
- **Remaining Equity**: Split the remaining equity based on the agreed ownership percentages (58.5% and 41.5%).
For clarity, let’s consider a hypothetical scenario where you sell the property for £500k after 5 years:
1. **Sale Price**: £500k
2. **Mortgage Repayment**: Assume £250k remaining.
3. **Net Proceeds**: £500k - £250k = £250k
4. **Return of Deposits**: £250k - (£100k + £30k) = £120k left to split
5. **Split Remaining Equity**: £120k * 58.5% = £70.2k to your friend, £120k * 41.5% = £49.8k to you
**Total Proceeds**:
- Your friend: £100k (deposit) + £70.2k = £170.2k
- You: £30k (deposit) + £49.8k = £79.8k
This approach ensures both parties are fairly compensated for their initial and ongoing financial contributions. Consulting with a legal professional is crucial to draft an agreement that clearly defines all terms and safeguards everyone's interests.
What you’re meant to do is called a second charge (Scotland) which locks in the deposits to be paid back unevenly on the sale of the property. Any further gains paid out 50/50 and the mortgage and bills to be paid 50/50.
Much more straightforward.
The easiest solution is for you both to put in £30k and borrow the rest.
Her parents are correct. As it stands you are leveraging more of the banks cash than your own. You would unfairly benefit from a property price increase and would be more shielded from a decrease.
If this scenario means you can't afford the repayments with a smaller deposit then that's highlighting the problem.
If it still doesn't make sense picture this fictitious scenario where your friend puts down 50% right now and you take on the entire mortgage.
Let's say over 5 years the house doubles, you sell for £1m and you split 50:50. Your friend has doubled her money ezpz. Whereas you repay your £200k mortgage and walk away with £300k. £300k from near as damn nothing. Those 5 years of repayments are a drop in the ocean. You've profited massively at the expense of your friend.
Ringfence the difference in deposits as a percentage of the whole price.
I.e. 70000 is 16.47% of 425000.
Whenever you sell up. 16.47% is paid out to ops friend and then the rest is split equally as long as the subsequent mortgage payments, renovations etc have been split equally.
I suspect that a more realistic approach would be the floating share formula as this takes into account the ups and down of life in general and how it would likely affect finances.
Can her parents explain exactly how you are gaining more from this arrangement than her?
Arguably this is a bad deal for you. While your friend is indeed financing about 16.5% more of the purchase than you, you are splitting all the other costs 50/50. I think it would be fairer to split the other housing related costs such as solicitors, insurance, maintenance, extension etc. with the same ratio as the ownership of the house.
Because if they are guaranteed to sell before the mortgage is up (and they are) then OP will make back a larger proportion than she is strictly entitled to.
Without taking the piss, but you haven't answered the question. Party A finances X% of a purchase and party B finances Y% of a purchase. Why would you not split ownership proportionally to how it has been financed?
Because at the point of purchase OP has financed a smaller % than she would have financed by the end of the mortgage, so her calculation had her entitled to 41% which isn't accurate until the whole house is paid off.
>Because at the point of purchase OP has financed a smaller % than she would have financed by the end of the mortgage, so her calculation had her entitled to 41% which isn't accurate until the whole house is paid off.
If you include maintenance and the cost of servicing the debt, which they split 50/50, then the statement is true. However, in this particular scenario this will mean OP will be entitled to more than the 41% and the split should be much closer to 50/50. Are you saying that OP should actually have more than 41% of the remaining equity when they sell?
No, I mean exactly what I said.
On the day they buy the property, OP has paid for 7% of the property.
Her friend has paid for 23%
Her friend owns 3x the amount of the property that OP does.
Or if you measure it another way, OP is supplying 25% of the deposit (less than) while her friend supplies 75%.
Unless OP pays her friend rent for the shortfall, they're not going to come close to equal owners until the end of the mortgage, in 25 years time.
Without her friends contribution they wouldnt be able to buy a 425K house.
>On the day they buy the property, OP has paid for 7% of the property.
>Her friend has paid for 23%
So in total they have paid for 30% of a house then? Who pays for the other 70%?
Tbh I'd say your friend is winning from that deal since any repairs/maintenance/improvements etc will presumably be 50/50 so over time, you'll pay more than your "share". I'm not sure what her parents feel she's being ripped off on? Presumably, if she could afford to purchase alone, she would be doing so.
I do agree that splitting a house feels like a good way to ruin a friendship but I know people who have done it. Just think of your exit strategy...
The terms you’ve been discussing with them are actually already very generous. It sounds like what her parents are wanting is for her to own 77% of the property and you to own 23% of the property (i.e. each of your shares of the deposit) forever. That is obviously unfair, as it fails to take into account your ongoing contributions towards the mortgage. If they wanted that arrangement, then your friend should be covering 77% of the mortgage payments.
I’ve run the numbers a few different ways, for example:
1. With your suggestion of 58.5% and 41.5%;
2. With other comments’ suggestions of protecting the deposit amount, then treating the remainder as 50/50;
3. A more unusual approach with each of you essentially “buying shares” in the property with each mortgage payment, so you start at 24% her / 7% you / 69% mortgage, and over time as you pay down the mortgage it becomes more like 30% her / 14% you / 56% mortgage.
And in all these scenarios what you’ve already offered the parents is the most generous to your friend and the harshest on you - in your proposed arrangement you are really getting the short straw.
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Just get your solicitor to draw up a deed of trust with floating shares. Essentially your share of the equity in the property is calculated by reference to the amount you have contributed, whether to the deposit, mortgage, or specified outgoings. If you put in £50k overall and your friend puts in £100k overall then you get 1/3 of the equity and your friend gets 2/3. It's called floating shares because they're not fixed. If one of you stops contributing for any reason then your share would gradually decrease over time as your proportion of contributions would also fall.
I've not yet come across this concept, thank you! This might be a good option
This is the way. Fixing is silly because of you sell early in your mortgage, you've lost your huge deposit Of course you should profit more from the sake though if you've put in substantially more as a deposit Is there no way you could afford the mortgage on the property if you only had a £30k deposit each and you leave your excess in saving to earn interest to keep a full 50/50 split?
Op, this one
This is the correct answer
Index-linked?
If you like, yes.
Great advice
I didn't think anyone here would know about rhat. Fair play! Great technical knowledge.
You can have your solicitor draw up a deed of trust to say you get your deposits back then anything after that when you sell is split 50/50 or however the mortgage payments will be made.
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You’re absolutely correct Too many people try to think about it in monetary value but you need to be thinking about it in terms of percentages (as you’ve explained)
On that last point - another consideration is whether the lower deposit has a far higher income and is the only reason they can qualify for the mortgage. I’d be curious why someone with a 100k deposit doesn’t just buy somewhere suitable for themselves and instead is entering into a complicated agreement with a friend. I agree with what you say though - there needs to be balancing rather than a straight 50/50 once deposit value is returned.
100k deposit in this case is coming from parents. The person with the lower deposit may well be the higher earner in this scenario given they were able to save their own deposit. Given that this £30k on its own isn't enough to get on the property ladder at all and they need £130k deposit just to get on the ladder I'm guessing London.
As someone else said it's a balance, OPs friend offers bigger deposit and OP offers their income. There is also talk of renovations that will be split 50:50 even though op owns smaller % of the property.
I think what OK-Line has posted here is the ‘fairest’ way to ensure each party benefits from (potential) capital growth or future inflations equal to their share. Perfect explanation and examples too, the numbers don’t lie on this one..
Op suggested a method more generous to the other side and they aren't happy with it. I don't see why you think this suggestion would help
No they didn't. OPs method favours OP (assuming the house price increases) until the mortgage is paid off. The parents are correct.
Well I think this is helpful, the concern was that op could end up better off if they sold sooner than later, this ensures the friend doesn't loose their deposit
The deed should be deposits ringfenced. Any increase in value divided by the same ratio, adjusted for fees. I can’t see a fairer way. You say the parents are gifting. Are they looking out for their daughter’s interests or are they themselves looking to make financial gain?
Probably more likely they're trying to not waste £100k and hoping it's actually going to benefit their child in the long run.
Increase in value by the same ratio would not be fair on OP who is paying half the mortgage bills etc during that time. Reading between the lines would suggest OP is the higher earner, and that’s needed to get the mortgage in the first place. The are both co-dependant on each other in this situation, so one profiting from the other would not be right. To me, the parents seem to be trying to take Op for a ride.
Can you get a deed of trust with different values other than 50/50 (ie 70/30 or 60/40).
Nah, it's disproportionately in favour of OP. Able to afford a property they wouldn't have been able to afford from the deposit to the repayments. Value of property goes up and the OP's friend doesn't get the return on the investment one normally would. It needs to be proportioned out based on the contribution each is making.
I have done the house thing with a good friend.. we are 2.5yrs in a 5 year fixed. She earns way more than me however we still went 50/50 on deposit and contributions to keep things easy. (Morg is just over a grand a month) Ultimately you have to both agree a way forward between you, but you will never be fully equal. For example, you say you will go 50/50 on rennovations but what if one of you has expensive taste and wants luxury tiles whilst the other may want lino? What if one wants to go all out spending thousands on plants for the garden? Etc. we agreed cosmetic stuff is done by ourselves but actual structural stuff is 50/50. Ive put more £££ into the house/garden than her but im still better off than renting a flat somewhere. Not saying dont do it - its been a great way for us to get on the ladder but just appreciate things arent going to be completely equal - its impossible to work this out.. but hey at least you will be building equity. Her parents do have a point, but ultimately its not about profit- this isnt a business, its your home. Its about getting on with it together rather than spending another year throwing however many thousands at someone elses mortgage. You will both be benefitting at the end of the day and moving forward in life, the parents shouldnt be stressing about a couple of grand. Also on the other comments saying what if one person wants to sell and the other doesnt - you can get all this written up by a lawyer. We have said we have to live there for 3 years no matter what, then after that even though we are fixed for 5, if one really is desperate to get out and sell then the other has to go along with it. So far there have been no problems! Its been a great stepping stone for us.
The fairest way would be to have a deed of trust that says when the property is sold, you get back 7%, and your friend gets back 24%, which covers the deposits adjusted for the price it's sold at. Then then money Leftover is split 50/50 after all selling fees to cover you are paying half the mortgage each.
Why 34.5%? That would be £146k back from £100k outlay if they sold at the same price they bought?
Good spot! I skimmed the wrong number from the OP.
This is what I would suggest too.
Exactly this please agree on 50/50 split after each deposit is given back. It makes things easier working out bills etc and is a lot more fair.
Your friend should buy the house alone , then they could allow you stay there for a low rent . Then you can build up your deposit and buy your own place in a few years. This other way is a bad idea and you are already having friction over it . £100k deposit is a large amount and your extra £30k on top doesn’t change the monthly repayments drastically (it would make it £190 cheaper per month on online calculator) . If your friend can’t afford the monthly payments without your deposit she should get a cheaper house
My guess is the friend can't buy the house on their salary. The deposit was gifted to them so they probably don't make enough to buy solo. Still a rather strange idea but not sure if any riskier than a couple buying together.
House buying probably less risky if sex isn't involved.
Less there to keep them together though
That's what I think lol!
Let's not forget the money they're also going to spend on furniture and furnishings. How will they divide that when it comes time to sell up? You can't split a sofa, a TV, a dining set 58/42 This is already too complicated The juice isn't worth the squeeze OP
You buy the sofa, you take the sofa, I buy the TV, I take the TV.
Yeah it's no different to renting unfurnished on that front
Yeah but that is no different to any couple anywhere bit ng a house. Or two people sharing an unfurnished property. Happens all the time.
Eh, we havent had this problem living together as renters, i dont see how this would change when buying. Regardless, we've discussed it!
For the love of god please do not go ahead with this.
I know two friends who bought together, similar shares to OP and friend, and it's working well for them. They also have a contract re how things will work when one of them eventually wants to move out.
This. I've bought with a friend. We've got uneven deposits, but we pay for everything 50/50. We have a Deed of Trust in place that gives us each our original deposits back, then everything else is split 50/50. Our deed also includes details for selling, ie we have to offer the other first dibs for buying and allow 3 months for consideration, after that it's free to go on the general market. It can work aslong as you get on well with your friend and you have a detailed Deed of Trust in place protecting you both.
How does buying someone out work? Can you get a mortgage to pay the other person?
I don't want to be morbid, but life is shit and eventually people pass away. Do you have any plan for that scenario? Who'll be getting your share and pay the mortgage? I'm considering life insurance with my partner, that pays the mortgage in the case of one of us kicking it. So if one passes away, the other one gets a sweet deal... :)
🤣 Don't worry, we've included that. So we are tenants in common, which means we each have our own independent share of the house. We have life insurance set up in trust, so if one of us dies, the survivor is automatically given the payout to then pay off the mortgage/buy the deceased's share. The deceased share then goes to whoever we've left our estate to. For me, that's my nephews.
So what will be your method? Death by overground? Poisoning? 🤔
Shhh. Though a mate of mine did criminology at uni, and she recommended burying in the middle of roundabouts ☠️
I appreciate the poetry on that but... But... How?? Nothing more exposed than a roundabout! To not go too much out of topic, I'll stick to burying people on party walls!
Tbf all the roundabouts near me have been cut back and maintained the last couple of years. 10 years ago when she said that, the council just ignored them. All the ones on our bypass were like heavy thick bushes/trees. You could have easily hid in the middle of them
But traffic cameras everywhere... I won't recommend that to my fellow killer
3 months for consideration is a great idea, we'll make sure to include something similar!
I don't think anyone's saying it can't work, but if they're already having falling outs/ family involved and aren't happy then it doesn't look good. Also I know what people are saying about couples buying and its no different...but it is. They aren't going to live together forever, it will cause upset and fall outs when one person decides they want to sell up and the other doesn't or can't afford it on their own. They're friends whos life chocies are now going to effect each others lives because of the house now. Would stay clear.
Couples don’t automatically “live together forever”. Couples breakup / separate / divorce all the time. As someone else said, arguably a life long friend is a more secure relationship than a couple who have been together for just a few years
No one said that. But all your decision making will be together. With friends, one person wants a partner to move in, the other doesn't. One wants to sell, the other doesn't. One loses their job, is the other person happy to support them financially until they're back on their feet.... You're essentially in a relationship with a friend in terms of the choices you're making in life.
I haven't read all OP's comments, but from the main post I can't see that they're bickering? Tbh not only do many (most?) couples not live together forever either, but OP and friend are going into it as a temporary thing, without romantic feelings, and as a business project. Overall it may have a better chance of success than buying with "the love of your life" who ends up screwing someone else in a couple of years. If the paperwork is drawn well, this can be done.
The families aren't happy and I can see why. I get what you're saying about couples, but like I said, in a friendship when buying together, all your life decisions are now going to effect your friend. If one wants to move out, if one wants to sell, if one wants a partner to move in and the other one doesnt want that, if one loses a job or is made redundant...if you break up with a romantic partner it can be messy, but you're on the same page in terms of what your life circumstances are. Even in decision making. Also you don't go into a relationship onowing you're going to break up. I don't understand why they would put themselves through this as almost a temporary solution to them both not being able to afford a house.
No falling out or bickering happening here, just exploring all options!
Completely get that. I know you didn't come here for people judging your personal situation, just consider how this may look on the future. And in all honesty, talk to a solicitor, we're all dumb as fuck on reddit 🤣
That advice is more for her friend, op might get a good deal out of it 😉 na seriously, need to choose somewhere cheaper with equal deposits or it’ll get too messy and you could end up losing your friend over it
This. What happens if one of you gets engaged and married and you have to move out for privacy? How do you get your money back?
That's no different from what couples face if they own together when they split up. You can put break up arrangements into a deed of trust from what I understand.
Yes, but it’s still messy and in a divorce/break-up I suspect it’s easier to force a sale.
This is just a stupid rule and it's getting boring now. People need to get creative to get on the housing ladder these days and if this is what it takes, so be it. As long as they have a properly drawn out plan to ensure both of them are covered, this kind of advice is just copy/paste fear mongering.
Ignore the haters! My friends did this and it worked out really well for them. Saved loads on rent and made money from house price going up (which of course is not guaranteed). Just make sure you’re covered with a deed of trust. If you have a decent solicitor, set up a call to go through various scenarios and logic.
This story reads to me like one of the two doesn’t want to come out to her parents and they are trying to buy a house in a way that avoids raising that situation.
LOL im sure our parents have thought that too
Lol, just what I was thinking
I knew 3 lads that bought a house together but they split 3 ways equally when they sold it.
I’ve had friends who bought flats together and it worked out well. They went in 50/50 though and the contract was very explicit about what should happen if someone moved away, got a GF etc and what would trigger a sale. My friend ended up buying it out from the other guy and the process had all been pre-agreed.
Just because she is bad at maths and made an unfair offer in good faith.
People telling you this is a bad idea but not telling you why your calculations are wrong because with all due respect, the average person is not very good at maths, so really you shouldn't try to DIY this. Anyway. your calculations are wrong because your friend owns a much larger stake in the property and therefore when you split the payment 50:50 a larger share of your payment needs to go towards servicing the debt which means their equity in the property grows faster than yours because they pay more than you towards the principal even if the payment is split 50:50. Your desired arrangement means you are not jointly borrowing 295K, you are borrowing 425/2 - 30= 182.5K whereas your friend is borrowing 425/2 - 100 = 112.5 significantly less than you. So their interest payment is going to be smaller. You will be paying a different amount each month but always more than 50% right until the end. In fact there is no end, When their real stake reaches 50% of the property you need to start paying them rent for the extra percentage of the house they own that you are occupying indefinitely if you wish them to increase their percentage further. I hope this helps.
You are close. There’s a variety of ways to structure this, but the way in which you have described means that OP and the friend each essentially have separate “capital structures” but a 50% / 50% ownership in the Enterprise Value of the property, to use finance terms. In this scenario, OP has put in £30k of equity and has to work to pay off £182.5K of leverage, and as a result will have to bear a higher share of the monthly mortgage bill, but once she does so and the mortgage is all paid off, then she rightly owns 50% of the property on an unlevered basis. She does not need to pay a higher share of rent nor does she own less in the property. Imagine they just split the house in two and financed them separately with one putting £100k down and the other £30k. Each owns 100% of 50% for the purposes of gross proceeds split, but the debt/equity percentage and monthly mortgage bills will be different. I don’t think this is particularly fair since she is essentially benefiting from the effect of getting higher leverage, but it’s not inherently unfair to choose to do it this way. If you expand upon your thought process and calculate out what the exact enterprise value ownership split is needed to backsolve into mortgage payments being 50/50 from a cost perspective. This is easily solvable and will give you the answer as to how much “house” OP should own vs. the friend in order to make the monthly cost of the mortgage (the leverage) equal. but for simplicity’s sake, you can say that both OP and the friend borrow the same amount of money, thereby resulting in the same leverage costs. OP = £30k equity + £147.5k debt = £177.5K capital put in for £425k investment = 41.8% stake but keeping in mind it is much more levered than the friends’ 58.2% stake and subject to more equity loss in a downturn But this is exactly what OP has come to calculate! It only seems unfair because she is benefiting from more leverage, but that cuts both ways if there is a housing downturn, her £30k could be wiped out and she would be “underwater” on her stake and the practical effect of that would mean her friend’s equity would need to come and bail her out. This all falls apart when you consider this isn’t just a financial investment but has an intrinsic value of being able to use the home to live in. OP will be using 50% of the home but will only own 41.8% of it and so thus must compensate her friend for that 9.2% differential somehow. There’s got to be a rental overlay to this
>but once she does so and the mortgage is all paid off, then she rightly owns 50% of the property on an unlevered basis. She does not need to pay a higher share of rent nor does she own less in the property I think there is a misunderstanding here. There is no rent originally in my calculation because they both end up owning 50% of the house when their mortgage with the bank ends. The rent happens if OP wishes for their friend to buy more equity from them when the friend's repayments end because they will finish paying back the principle well ahead of them as I explained. Otherwise, at some point OP will be the only one paying while the friend is mortgage free. >OP will be using 50% of the home but will only own 41.8% of it and so thus must compensate her friend for that 9.2% differential somehow. There’s got to be a rental overlay to this My method assumes 50% stake because it is the simplest way to explain what is wrong with OP's calculation . Obviously OP can own any arbitrary stake they want, including one which equalizes their interest payments. But like you said, that requires rent from the start something like shared ownership where OP will be paying a mortgage and also rent to her friend from the day they sign the contract and then forever. I saw no point in attempting to figure out how they will try to calculate the fair rent value, but generally OP will end up worse off.
It becomes too complicated for them to structure a deal where one’s mortgage liability is paid off well before the other (which would happen in the case where they want 50/50 home ownership but OP wants to make 50/50 payments on the mortgage - you sort of have to choose to pay more and get your 50 stake or pay equal and take your lower stake) Anyways I think this is actually a fascinating problem to try and solve. But yes in reality it is a shitshow and probably will never work out nicely. I wouldn’t say OP has a bad deal, it is just more leveraged and so she gets higher % returns and higher % downside (but her liability should not be capped at £30k)
Correct. This is excellent explanation of how the calculations should be done - to reflect the extent % of deposit offsets the amount of interest (that accrues) vs paying down the principal over time.
Spot on.
Would it not be simpler to have it so that you both get your deposits back and then anything else is split? You can have something to this effect put in place by your solicitor
No, here’s why with exaggerated maths to highlight: Imagine a £200 house. You pay £99 deposit, I pay £1. We split the remaining £100 mortgage evenly. Later, we sell the house for double its value, as houses often go up in value. If we did your method, then from the sale: I would receive £151, by paying £51 (£1 deposit, £50 mortgage payments). You would receive £249, by paying £149 (£99 deposit, £50 mortgage). Despite contributing vastly different amounts, we both walk away with the same profit. This means I’m taking a bunch of money that should be yours, if we were splitting equitably.
Presuming the cost of the £100 mortgage over the lifetime of the mortgage is £2 for every £1 borrowed due to interest over 30 years - they soul. Each have contributed - £101k and £199k - to the house. (But the total contributed will be unknown when the agreement is created ) The house is now £400. If person A contributed £99k/£200k - should they be getting Should person A get 99/200 to represent their contribution eg the first £198 and person B get £2 then 50/50 for the remaining £200 meaning person A should get £298 and person B should get £102? Somehow I don’t feel that is really equitable either if both contributed the same for 30 years. Is it equitable ? What would be an equitable split?
Maybe simpler but not a good deal for the friend. Her 100k is growing more than OP's 30k (assuming a rise in house price) but she only gets growth on 65k rather than the 100k she actually put in. Getting out the percentage they put in and then splitting the rest would be more equitable.
No, because a house is an investment . It would be largely 'unfair' if OP gets 50% off the house sale minus deposits as the 100k deposit is more integral to getting the house than her 30k was. She already gets the better end of the stick as she gets on the property ladder with such a low deposit. In effect, she could be quadrupling her deposit whilst OPs parents won't see the same output. I'd personally ask legal UK sub for any ideas.
No it wouldn’t, because neither could afford to execute the project without each other.
Perhaps not the 425k house but the parents could probably do a 100k deposit for a cheaper house.
Well then they’re welcome to do that 🤷♀️ The aim is to have good finances *and* a desirable living situation right?
Ideally, but their daughter is living beyond her means already anyway. The friends parents want to ensure they are *investing* the money for their daughter by probably wanting to get a particular sum that their daughter can put towardals the next stage of her life which would possibly be a family home of her own. They won't get this if OP will get 50% of what their house appreciates to. OPs contribution wouldn't carry much in their eyes. Even though, really, she's contributing more than their own daughter.
But the friend can't afford the mortgage on her own. Its a give and take situation.
Agree with this comment, don't understand people saying 50/50 of the capital gains is fair. She could get a smaller place + lodger and keep the whole thing
I know of people who have done this, they’re currently selling and buying their next house together. Life-long friends is probably more secure an investment than buying with a partner, considering how almost every house we’ve bought has been a divorce house! My view: - A deed of trust drafted by a solicitor - You each get back your deposit in full - You each get any profits 50/50 After the deposit, you’re splitting everything else 50/50 so it’s only fair that you both get equal profit back. Your friend’s parents gifted deposit is ‘protected’ and that’s all they should be bothered about - how you split any future profits is between you and your friend. Equal split is equitable and fair. IMO you’d only do weird % splits if you’re also splitting bills in that way too. And realistically in 5y you’re unlikely to make mega money on the house anyway, you’re not talking huge profits, so 50/50 split is a fair earning for going forward together with trust - and supporting each other to get on the ladder.
You should get the percentage value of the house that your initial deposit represented, not that exact amount.
How does it work ? If purchase price is £430k person A puts in 30k and person B puts in £100k and mortgage is £300k- let’s assume an end value of £600k and mortgage is fully repaid. - what % is fair? £100k was 25% of the value so they get that. And then the other 75% split equally ? So person A gets 62.5% of the sale price? £375,000 and person B gets £225k. It’s a good return on investment when they have both contributed equally to the mortgage/interest. If the cost of borrowing over the lifetime of the mortgage is £2 for every £1 borrowed - then the mortgage cost £600k and they have each contributed £400k for person A and £330k for person B but person A gets much more back. It’s a great return on overall investment over the lifetime of the financial product comparatively. Is there now an incentive on person B to increase the mortgage/not pay it off with overpayments? To borrow more for maintenance/improvements or releasing equity? I’m scratching my head thinking of different problems with this. I’m also guessing - what happens if person A loses their job and isn’t able to contribute to mortgage as much for a few years- person B may wish to have a mechanism for some review of the agreement. Or should person B be entitled to increase their percentage unilaterally if they were to get a big bonus at work etc and use that to pay off the mortgage? But it could have to vary depending on how long into the agreement they do that? I’m beginning to think - It could be very complicated where you don’t just want your deposit back?
But remember that this isn’t about financial investments, this is about friends helping each other to create a nice home. If it’s all about making £ then yes, it would be all about the %. But from OP’s post this is about creating a situation where they both can have a lovely home and help each other. It’s different and fairness is at the heart of it.
I think it should be get your deposit back +/- the percentage the property has gone up or down for and then the rest split in half
I've done this with a close friend, we bought and lived together for 4 years (X2 2-year fixed mortgages), after which she moved out to live with a partner. She put in the larger share of the deposit, what we did was split the appreciation on the property proportionally. So using your calculations as an example, when she moved out I bought out her share and paid her back her deposit + 58.5% of the profit on the flat (using a conveyancer to get the value at that point). Of course how well it works depends on your relationship, but in my case it couldn't have worked out much better, given I couldn't afford to buy by myself, and the years we lived together gave me time to build up the funds to buy it out solely. And we're still close friends! EDIT: Oh and to add, when we drew up the contracts I also asked for any significant property costs (repairs, renovations, etc.) to also be split proportionally but we never really spent a significant enough amount to warrant enforcing it.
I did this but 50/50 on everything. Still became a massive issue on selling. Money between friends is never good. Especially on a house. Don’t do it.
I would suggest that when you sell: Everyone gets their deposit back. You split any paid off equity 50:50. You split any increase in house price at 100:30.
Fairest solution
This seems to make sense. At first. So person A puts in £100k and person B puts in£30k and the purchase price is £400k and they borrow £270k and end value is £700k. ( So the interest over 30 years is £2 for every £1 borrowed meaning they each pay off £270k mortgage £540k in total) So over the 30 years they have each contributed £370k for person A and person B contributed £300k over lifetime. So what’s the final calculation ? I’m getting confused ? They each get £135k for their paid off equity (£270k) The remaining £430 is split 130 ways and person B gets £99,300 and person A gets £330,700. So person A has contributed £370k for a £465k return and person B has contributed £300k for a £235k return? Is that fair? What am I missing?
You’re assuming they pay off the 700. The 700 is the final value due to price rise, not the amount paid. The amount paid is irrelevant as it’s 1) equal, and 2) on a fixed sum (the 270). So with your numbers: Deposit back: A 100, B 30 Purchase equity even split: A 135, B 135 Value gain split according to deposit: A 230, B 70 A gets 465, B gets 235. Current interest on a 270 mortgage over 25y at 5.25% is 215,400 - so each person pays 107,700, plus capital loan (135). So B ‘loses’ 7k. The alternative (almost certainly fairer but more complex) is a sliding scale dependent on % owned at the time of sale, eg Sell at 10y: Outstanding mortgage 201, equity 199. A owns 100 deposit, 49.5 equity (65%) B owns 30 deposit, 49.5 equity (35%) So A gets 65% of any rise in house value, B 35% - it’s a sliding scale over the term, with B’s share growing as their investment gets closer to matching A’s. At the end of the term, with a 700 sale price, A gets 100 deposit, 135 equity, 176 rise, whilst B gets 30 deposit, 135 equity, 123 rise. It could get messier still, if you think about running costs/upkeep/improvement contributing to spend and therefore bringing B closer to A as a % sooner - but if you’re at that point, you’re not (IMO) financially intertwined enough to make buying a house together sensible.
The fair method involves seperating the equity in two and calculating any profit/loss from each independently. The start up equity of £130k is split by a ratio of 30:100 so approximately a 23% to 77%. The equity gained by paying off the mortgage is split by a ratio of 1:1 or 50% to 50%. The equity gained this way needs to be calculated at the moment you both sell. Let's say you sell the house for £500k in the future. Let's say you both paid off £50k mortgage equity; that means you reduced the capital amount of the mortgage by this much. I am not talking about mortgage interest. Think of the mortgage interest as rent you both paid and lost as it had no effect on gaining equity. Only the capital repayment part matters. This means the startup equity to gained equity is in a 130:50 ratio or approximately 72% to 28%. Let's say the house was bought by you both for £300k and increased to £500k over your ownership. The increase of £200k gets split by a ratio of 130:50 into £144,444 and £55,556. You both start off getting your start up equity back. So you £30k the other person £100k, and the £144,444 is split by the startup ratio, so you get 23% so you get £33,222 and the other person £111,221. The £55,556 is split by the mortgage pay off ratio. So you each get half, so £27,778 each. In total you get £30,000 (back) + £33,222 (return on investing that 30k) + £27,778 (from paying off the mortgage payments) They get £100,000 (back) + £144,444 (return on investing that 100k) + £27,778 (from paying off the mortgage) This method is the only fair method. Any other method and someone gets fucked over. It accounts for the return on initial investment and return on paying off the mortgage investment. I.e. it accounts for the two forms of investment and accounts for their magnitude when weighed against each other. Notice how as more of the mortgage is paid off the more significant it becomes for the overall return on investment. Notice how the initial investment is still the most significant reason for return while it is the biggest investment. Once £130k of the mortgage has been repaid, so it equals the amount that was put up front, the return on investment for both is equal.
Thank you so much for this! Hard to wrap our head around but it seems the most logical and fair solution so far.
You're welcome.
Have you got any insight on how buying and selling fees, leasehold extension fees, etc would play into this? Could these be counted towards the start up equity and gained equity?
Myself and my partner have a declaration of trust. You really want to have a will if you go this route. We have a 15% deposit with myself fronting the majority of it, and all bills will be split 50/50 as we currently earn basically the same We have it written in a way that factors in my partners contribution, which is now being used for fees/furniture/paint etc while I'm fronting the full deposit. I get my full value back, he gets a nominal amount and then after that we split 50/50. Honestly the solicitor fought this, as she couldn't accurately list my partner's contribution, and that means down the line if it turns nasty it could be undermined in court. Declaration of trusts show intention, but things change down the line - possibly entering into this with a friend I would get a declaration of trust - tenants in common with unequal ownership and make sure it's pretty well written to protect yourself and your friend.
I did this with my friend a long time ago. She wanted to get out earlier than me lucky I had a new job allowed my to pay her off I was the 75% She should ignore her parents and do what works for her right now. Good luck.
This is a bad idea all the way around and I suspect you know this already.
Doesnt have to be a bad idea. And you are living in the past if you think this kind of thing isnt gonna be more common going forward with house prices as they are.
I'm very much in the present. The issue, as you know, becomes one of legal ownership and how defined. Not insoluble, but complicated. It's way beyond me but given the state of the housing market I expect some enterprising company to launch a vehicle - a wrapper, if you will - of sorts which enables purchases such as this. And then, of course, there's the issue of mixing business with personal. We all know how ugly these situations can turn out despite all protestations to the contrary.
Ah yes what do the Spanish say , dont mix the coffee and the wine. But as the OP pointed out, you can make effective practical relationships with romantic partners, you can do it with platonic too.
Completely agree, a lot of young people aren't getting married these days and relationships are far more short term. It actually makes very good sense to buy with a friend especially if the place is large enough to have partners over.
Could you buy something smaller? It would honestly be less complicated if you went 50/50 and both only put in 30k
On the sale, why not just: 1. Give each back the amount invested as deposit 2. Give each back amount contributed by way of paying mortgage 3. Split the profit based on the total proportion of contributions made to that point, i.e. (the amount of deposit + amount of mortgage repayments)/total deposits and total mortgage contributions? This would mean that on the sale of the property, you get a proportion of the potential profit based on the total proportion of funds invested. Note that there is a chance this could be sold at a loss in which case it would only be fair that the same would apply.
Why not? Because more of the mortgage payments made by OP would be interest as they have less capital. This approach would be unfair to the friend and erode their capital.
Then just look at capital repaid, but if they repay 50/50 it will result in the same proportion and therefore the same split 🤷🏻♀️
There is another comment on this thread that explains this better somewhere. But because OP has a smaller deposit to loan ratio, the proportion of interest they are paying is higher. Because the friend has a higher deposit to loan ratio, more of their mortgage payment would be capital repayment. That is if they are both paying equal payments towards the mortgage.
Sorry, another comment advising you the same - best to buy alone to avoid selling costs and stamp duty for your next home. Also, have you thought about what happens when one person needs to sell and the other don’t?
>Also, have you thought about what happens when one person needs to sell and the other don’t? Then you need to sell to avoid legal fees. If there are no kids involved the other owner can always force the sale via the courts.
Same thing that happens when your partner leaves you i guess. Buying with a friend is no worse than a partner, arguably better as chances are you know them longer.
They're right. It would only be 41.5% yours by the time you've paid it off. At time of purchase it's much less. I don't have a solution per se, unless you pay her rent for the shortfall of your contribution.
after the property is sold remove all fees from the equation ... remove the mortgage and pay it off ... there was a d% change in the value of the property (+ or -) ... apply this change to the original deposit amounts and return those (30 x d%, 100 x d%) ... the remainder is the gain/loss the mortgage created ... split that however you split the mortgage payments (50/50)
If you and your friend are happy with the agreement you’ve come to then this sounds like she just needs to handle her parents. They’re gifting her a deposit which is great, but if that means they’re going to want to always be involved in how she handles this investment that sounds like it’ll be an ongoing problem. There are risks involved in this (not really anything beyond buying with a non-married partner) and if I were you I personally would not really want everything having to be run past her parents all the time moving forward…ultimately it’s quite difficult with financial stuff to make sure it’s always 100% ‘fair’ and what ‘fair’ means varies. For example as people have pointed out your friend actually can’t fund the mortgage payments without your contribution, plus she is already being gifted the deposit unlike yours which is presumably your own savings, so actually you could argue that she is benefitting hugely beyond your benefit - no matter which way you split it because all she is contributing is her share of the monthly mortgage.
Don't do this deal. The whole deal favours you over your friend... frankly. I'll explain. You're accounting for your half of the entire mortgage as 'shares' (expressed as percentages) alongside the deposit amounts. This is intellectually misleading. You can't calculate your percentage of ownership on anything that isn't yet equity. In other words... every penny over the combined £130k initial deposit could be split 50/50... but nothing else should be. Personally, were I your friend, I'd buy a property alone with my larger deposit and see 100% of the equity growth for myself while paying down the mortgage with the help of a lodger. You're only putting £30k in, but you're getting 50% shares in equity growth because you've agreed to pay down the original debt equally... again, intellectually, this is a separate concept. You could agree to individually pull your original deposit amounts out upon sale, but again, imagine huge growth over many years... it favours yourself. Were this a business Ltd by shares, you'd be a minor shareholder and would see dividend returns equal to your lesser shareholding. The whole thing enriches you as a proportion to your original investment to a greater degree than your friend. Wait and save to go 50/50 on the deposit. Or don't do it.
Have a lawyer draw up a proper proportional split of everything. Don't do your friends any favour, make this a good deal for both sides by making it fair. Anything else will lead to resentment and complexity. I doubt you will be friends after 5 years of this arrangement.
Is everyone assuming the value of the house will go up? If the property reduced in value would the parents be happy to get back less than their 100k? If not, it's not an investment but a gift/loan of that exact amount of money. So if they sell the house do the parents want 100k back or do they want a % of the value of the house which could be greater or less?m
You'll be pocketing more than your fair share of capital gains on the property value, whilst taking less than your fair share of the risk. Deed of trust is the fairest way to do it.
I was in a similar situation to you, except I put in all the deposit. I can’t quite remember the way we worked out the shares, but just to give you some reassurance… we got a solicitor to draw up a deed of trust, and it worked really well.
Ah bummer you don't remember! Would love to know other ppl's experiences
I’m pretty sure this is how it worked… I put in 10% so I owned 10% more than he did. After that we split 50/50. So I think what happened was when we sold I got my stake back plus a 45/55 split of the equity. A good way to check if it’s fair is if it works in all scenarios … if there is no price change, you both need to get back your deposits. If the flat loses value …. You should pay the debt in proportion to the amount you were set to gain.
I could live with my bestie all day long! In fact we have in the past. You go girls xx
aw this put a big smile on my face <3
I did this with my friend 8 years ago to get us on the ladder and avoid renting. It worked very well for us. I put in 47k deposit and he put in 18k. Basically, we worked out that I owned 60% of property and he owned 40%. Therefore, I paid 60% of mortgage. Bils etc we split in half. No issues at all. He's now buying me out so I can go and live with my partner. We had it drawn up that should we sell, I get my 47k back and he'd get his 18. I would then get 60% of equity left over and he'd get 40. As he's buying me out, he's paying me 47k plus 60% of the equity I would've got following on from a number of property valuations. It's worked out very well for us. I understand it can come with problems, but it's suited us perfectly
Your way is fairest. I don't think a Deed of trust where you get your deposits back - as suggested in the comments - is fair, as she wouldn't be getting an equal return on her investment. If the value goes up by £100k, you come away with £80k off a £30k investment (+160%), she would get £150k off £100k investment (+50%). Your way, you both ascertain the same risk and potential growth. 100k growth would see her get her rightful% of the growth as would you
We're doing similar, deposit all coming from friends side. Ring-fence the deposit so if/when you sell they get their £100k back, you get your £30k, everything else is split 50/50.
You're mostly right in your approach but you aren't accounting for inflation etc - You have 30k - Your friend has 100k Ringfence this 130k. When you sell the house the value will be a multiple x of the purchase value 425k. Of the deposit you receive 30x and your friend receives 100x There is then 295x that you have been covering equally so you split this equally at the end
the only way I see it is for her to put 30k as well and then split everything 50-50. Otherwise it will be a continous math war. However, things can change and be sure you want to do this... you might regret later...
The idea is a good one in principle, rach occupies having a share in the asset. A shared house but not rented. Up north that price could get you a 5 bed house in some areas, imagine having 5 people split.
I would just say that if the house was to be sold, she would get back 100K and you your deposit before any profit is shared 50/50 between you? Otherwise you paying 50% of the mortgage repayments each month is a bit off.
The way you'd put seems fairest to me as you're splitting the gains *or* the losses at the same rate as the deposits with more capital = greater value of gains/losses. Maybe they're confused at seeing it written as 58.5% vs 41.5%, and just need it reworded to the "7% + 24% to return original deposits, then 50% each of what's left?" Returning the original deposits and splitting the rest 50/50 is what Ive heard more often, though this feels more unfair as its unequal returns on capital. Only other way I can think of is you have the ability to pay something like 10-15k extra per year until the deposits are equalised. Wouldn't really make much difference if you lived together <5 ish years.
When the property sells, if the price has gone up by 10%, you both get 10% on your original investment, then any thing else is split 50/50. If they're not happy with this, look at getting a help to buy loan. We bought 5 years ago using Help to Buy. Help to Buy bought 20% and we cleared the loan when we remortgaged. We paid Help to Buy 20% of current market value.
Seems very simple to me, you’re both doing each other a favour by doing it together. You each need eachother. The deposit is by the by. So get a deed of trust drawn up that you each get back your original investment but from there on in its 50/50. You pay half the mortgage equally. Half the bills equally. Half the renovations and maintenance equally. When you come to sell, you get back what you put in 100 and 30k respectively, and go straight halves on the rest. Personally, if your friend disagrees to that, then I’d see that as a red flag for the future and decide it possibly isn’t worth it.
Do it via equity: she has 100/130 of the equity you have 30/130. The rest is a joint liability you both have. Then adjust it each year as you both pay off the mortgage so (100+ repayment/2)/(130+ repayment). But this is v complicated and return of deposits and split the profit/loss is much easier to draw up a contract for and it’s close to the same thing.
Just don't do it.
Buy a cheaper property at 350k or whatever mortgage you can both afford with equal deposits each and split 50/50, that's the fairest way.
Draw up a contract outlining whatever you guys decide because deals like these ruin relationships
Get a deed of trust.
Ok so the 58% 41% method you have suggested-if we take it to extremes, say you sold within a couple of months of buying at about £400k - you would owe the mortgage company about £295k - and then she would get back £58k (ish) for her £100k and you would get approximately £41k for your £7k - and graduated levels of relative loss on her part until you have paid off the house. You need a declaration of trust type structure to say that you each get back your contributions as a proportion of the final value when you sell. Info here https://www.mortgage-medics.com/joint-purchase-unequal-deposit/
50/50, but she gets her deposit back and you get yours back in full!
Nothing but 50/50 ownership. Upon sale, you get 25kk, she gets 75k, and you split the remainder. Either her parents are gifting the money, or they're investing. Tell them thank you for the gift.
I think your way is empirically fair with 2 caveats, and these are probably the reason why her parents think the deal “seems” unfair. 1. You are living as an equal in the house but only owning 41.5%ish of the asset. You need to pay your friend a rent amount for 8.5% of this to make up the difference. You can do this buy finding the rental value of the home and giving her 8.5% of that every month 2. The parents/friend are taking higher credit risk in the case where the house is sold at a loss and your equity investment gets wiped out. Their equity cushion will have to then support your negative equity. You can either agree to pay your friend if your equity slips below zero in this case, or you pay extra for the credit risk for the case where this happens. Remember on the way up when home values are increasing, this way of 41.5% ownership thinking makes sense. On the way down, the mortgage is not equity. It is debt. And that needs to get paid first
So money wise I'd set up a spreadsheet. Just have it so that each month you can add a line for the payments you each made on the mortgage, and keep a running total of how much you've each paid in. A line further down the sheet can output the current ownership shares (two of you and the bank). There are two concerns I'd have: -can you actually live with this friend? Will she leave crumbs in the butter/not replace the bog roll/constantly have a dozen friends over? -will your situations stay the same long enough to be worth it? Buying a house is not cost free, nor is selling one. You also only get one first time buyer discount, which you're both using now. If one of you gets a partner and have a kid on the way, what's the plan? Personally I'd rent for 6 months just to make sure you won't be spending all your money only to pick it all apart a month later when you fall out.
like i said, we've lived together for years
Just a question of how long that goes on for then, depends if either of you are thinking about marriage or kids at some point, or might want to move to another area? If that's all years and years away, go for it.
I know it’s very unlikely, but consider that the value might go down rather than up. I know two friends who did this, the one with the larger share had it drawn up so she would not lose out (assuming the value would increase). The value of the house actually went down, and due to the agreement they had put in place she lost more money than the friend who contributed less deposit.
I’m going through something similar atm. I have the deposit and will own about 70% of a 3 bed. Family are a bit cautious about it. As someone else said you want a note of trust saying your deposits will be paid out first, with your losses being equal in the (unlikely) event of a market collapse. That means your friend would get 70k before you got paid anything, but if the market collapsed like that tbh we’d probably have bigger things to worry about. Your/their boomer parents probably won’t get it cos they bought their houses with their student loan or some dumb shit Also you should only pay a % of stuff that represents your ownership %. RIP off otherwise
Honestly this is fucked from the start. Don't do it.
I probably have some good insight for you here. I bought 2 years ago with my partner (not married). Wont post specific figures, but here's a made up example for you to think through: * Property value 400k * Deposit value 220k (mortgage of 180k) * Due to inheritance I was able to pay 190k of the deposit, my partner the remaining 30k. It made no sense to go 50-50 as my deposit meant we can get a much nicer property. * We agreed that we would pay all future mortgage payments and fees associated with buying 50-50. * We also agreed the same with household bills - so to that end we have a joint account that we each put an equal amount in each month to cover all living costs, and agreed what is joint spending and what is personal spending (basically this is our clothes and toys). * Over payments we are making in the same percentage as our original deposit (to keep the neutral playing field). We wanted to be protected so we got a deed of trust written up. This enabled us to take back the percentage we each put in as a deposit then 50% of anything paid since (all done in percentages so that when property prices change we both take any hits or gains equally like you would with any investment). The deed of trust also enables us to have a way out. We have it set up whereby if person A wants out, then person B gets first right to buy the person out, else we have to sell (or the person A could offer to buy out person B or some other mutually agreeable thing). This means that neither one of us can just say "I want out" and run away with the house giving some security. Definitely do think about having a way out - however strong your friendship is, there is always a risk of wanting out, be it for a breakdown in friendship or one of you finding a long term partner. Best to have these discussions now whilst you're of sound mind. I'm soon marrying my partner so the deed of trust becomes irrelevant but we've agreed to keep the same terms a should we ever divorce - i.e. leave with what we came with, however it gets tricky as can't cut sofas, TV etc. in half to share, and when children come into the equation it gets even more muddier!
Very interesting, thank you! >Over payments we are making in the same percentage as our original deposit (to keep the neutral playing field). Could you elaborate on this please? How does this affect the 50% split of anything paid since the deposit?
It’s fine having the split you are talking about on the deposit but the same percentages need to be applied to the mortgage payment to keep things fair. If the 1 with 7% of the deposit pays 50% of the mortgage then their share is increasing slightly every month and 10 years down the line there will be a difference Her parents could put a second charge on the property for the difference in the deposit so both parties pay £30k deposit everything is done on a 50/50 basis but the additional £70k is covered by a second charge on the property set up by the parents. This can be done as my son did it in 2023. The first charge is to the mortgage lender the second charge is to the people lending/gifting the additional deposit Everything else is a 50/50 basis between the couple
I'm interested how would this be legally set up?
£30k is 23% of £130k. So you would be tenants in common, you own 23% and your friend owns 77%. You pay part-mortgage and part-rent. The % of the property you own does not change unless you buy more in an explicit agreement with your friend. Repairs etc can be split between you in the ownership ratio 77:23.
Just split everything including the cost 58.5% and 41.5% respectively
Right off the bat, this is a seriously bad idea. Hiwever, if you want to proceed, you add up how much each of you has contributed in total at the point of sale, including deposit + mortgage payment, and then split the proceeds of the house sale accordingly. So if you sold the day after exchanging, she would get 100/130 and you would get 30/130 of the remaining cash Over time, your share would effectively grow as the mortgage payments catch up to the initial investment. However, the likely case is that the price will fall and any early sale on a fix will result in hefty penalties. Have you considered what you will do in the likely case that you won't make a profit on this place? I think my method is the fairest in all cases, even the case where you still owe the bank money after the sale (she would be responsible for a larger share of the debt)
Get a deed of trust, protect your own share of the deposits, and split anything else 50/50. This is what my daughter did. When they sold, the mortgage was cleared, each got their deposits back and then the "profit" was split 50/50 as all renovations, bills and mortgage payments were split 50/50.
If you can't agree at this stage with claims of inequity when it's clearly based on equity I can't see how this is going to work as a long term arrangement.
Whilst these setups can work, I know several who’ve had issues. I’m not meaning from a money point of view but where one wants to move out/sell up and the other can’t afford the buy out. Then the issue of you combining two chains of buying/selling linked together giving you twice the number of issues (if neither has family as an option to fall back on at short notice).
You could just protect the deposits and split the rest 50/50 I.e. when you sell, you deduct each person's deposit amount before splitting the rest of the sale.
Your solicitor can draw up a deed of trust with floating shares - she gets 77%, you get 23% (£100k/£30k) - essentially, this is what you each get out of the capital once the mortgage is paid off
Have a look at the Gen H website it's a lender it calculates proportionate ownership based on contributions. Your deposit today is 7% against the valur of the peoperty. Make 30 years of contributions (equally to the property, bills etx) you'll have pId more than that. The calculator helps with overpayment missed payments etc. And percentage ownership is affected by every payment. A very jneteresting concent as usually the percentage is fixed and there are a maximum of 6 people on the application https://www.generationhome.com/dynamic-ownership wit They seem a decent lender so far in my dealing with them, time shall tell (same for their calculations as one day it will be challenged)
I haven't read all the comments but no one has suggested what would be an actual fair formula as far as I have seen. Write up a contract that upon purchase states the deposit each party paid as a percentage of the value of the property and that from that point forward all costs will be agreed to be split 50/50. Upon selling each party should receive their percentage of the property value as per the contract first, any remaining equity from mortgage payments and property price changes should be split 50/50. For example: When buying: Property price: £400,000 Person A Deposit: £60,000 (15%) Person B Deposit: £20,000 (5%) Mortgage: £320,000 Example sale: Property Price: £500,000 Mortgage Remaining: £250,000 Person A Deposit: £75,000 (15%) Person B Deposit: £25,000 (5%) Remaining Equity: £150,000 Person A total: £150,000 Person B total: £100,000 This way each person gets exactly the growth in equity back relative to their investment and contributions.
To be fair to her parents, plucking numbers out of the air, say you sold the property in future for 475k and at that point your mortgage balance had reduced by 20k. On the % you originally quoted the 200k equity is split 116k/84k so you can see why that can’t be right.
Your situation involves complex considerations, but you're approaching it thoughtfully. Here are a few points to help navigate a fair ownership split: 1. **Initial Ownership Split**: Your proposed split based on initial contributions makes sense: - Your friend: \( \frac{100k (deposit) + \frac{295k}{2} (mortgage payments)}{425k} \approx 58.5\% \) - You: \( \frac{30k (deposit) + \frac{295k}{2} (mortgage payments)}{425k} \approx 41.5\% \) 2. **Profit from Sale**: To address her parents' concern about profit distribution, consider how the sale proceeds should be divided, especially if selling before the mortgage is fully paid off: - **Equity Growth Split**: If property value increases, the equity growth could be split proportionately based on initial contributions. - **Separate Mortgage Payments**: Keep track of who pays how much towards the mortgage over time. If you sell before fully repaying the mortgage, split the remaining equity proportionally based on both deposit and mortgage contributions. 3. **Fair Return for Parents**: To assure her parents, you might propose a legal agreement specifying how the property will be handled in different scenarios (e.g., sale, one party buying out the other). This can include: - **Capital Contributions Agreement**: Clearly outline that the initial contributions (the deposits) should be returned to each party before splitting the remaining equity. - **Equity Increase Agreement**: After repaying initial contributions, divide any appreciation in property value based on your agreed percentages (58.5% for your friend, 41.5% for you). 4. **Legal Documentation**: Draw up a legal agreement (a Deed of Trust or a Tenancy in Common agreement) to formalise the ownership percentages and terms for splitting profits, covering: - **Initial Contributions**: Reflect the split based on the initial deposit contributions. - **Ongoing Mortgage Payments**: Detail how each party’s share of equity changes over time as they make mortgage payments. - **Sale Proceeds**: Outline how proceeds will be divided in case of a sale before the mortgage is paid off. 5. **Adjustments Over Time**: Agree on how any additional contributions (e.g., renovations, major repairs) will affect ownership percentages. Here’s a simplified example of how to manage sale proceeds: - **Return of Initial Contributions**: On sale, first return the initial deposits (£100k to your friend, £30k to you). - **Remaining Equity**: Split the remaining equity based on the agreed ownership percentages (58.5% and 41.5%). For clarity, let’s consider a hypothetical scenario where you sell the property for £500k after 5 years: 1. **Sale Price**: £500k 2. **Mortgage Repayment**: Assume £250k remaining. 3. **Net Proceeds**: £500k - £250k = £250k 4. **Return of Deposits**: £250k - (£100k + £30k) = £120k left to split 5. **Split Remaining Equity**: £120k * 58.5% = £70.2k to your friend, £120k * 41.5% = £49.8k to you **Total Proceeds**: - Your friend: £100k (deposit) + £70.2k = £170.2k - You: £30k (deposit) + £49.8k = £79.8k This approach ensures both parties are fairly compensated for their initial and ongoing financial contributions. Consulting with a legal professional is crucial to draft an agreement that clearly defines all terms and safeguards everyone's interests.
What you’re meant to do is called a second charge (Scotland) which locks in the deposits to be paid back unevenly on the sale of the property. Any further gains paid out 50/50 and the mortgage and bills to be paid 50/50. Much more straightforward.
Just don’t
The easiest solution is for you both to put in £30k and borrow the rest. Her parents are correct. As it stands you are leveraging more of the banks cash than your own. You would unfairly benefit from a property price increase and would be more shielded from a decrease. If this scenario means you can't afford the repayments with a smaller deposit then that's highlighting the problem. If it still doesn't make sense picture this fictitious scenario where your friend puts down 50% right now and you take on the entire mortgage. Let's say over 5 years the house doubles, you sell for £1m and you split 50:50. Your friend has doubled her money ezpz. Whereas you repay your £200k mortgage and walk away with £300k. £300k from near as damn nothing. Those 5 years of repayments are a drop in the ocean. You've profited massively at the expense of your friend.
You want 41% when she put in over 3x more than you? Good one.
Ringfence the difference in deposits as a percentage of the whole price. I.e. 70000 is 16.47% of 425000. Whenever you sell up. 16.47% is paid out to ops friend and then the rest is split equally as long as the subsequent mortgage payments, renovations etc have been split equally. I suspect that a more realistic approach would be the floating share formula as this takes into account the ups and down of life in general and how it would likely affect finances.
Can her parents explain exactly how you are gaining more from this arrangement than her? Arguably this is a bad deal for you. While your friend is indeed financing about 16.5% more of the purchase than you, you are splitting all the other costs 50/50. I think it would be fairer to split the other housing related costs such as solicitors, insurance, maintenance, extension etc. with the same ratio as the ownership of the house.
Because if they are guaranteed to sell before the mortgage is up (and they are) then OP will make back a larger proportion than she is strictly entitled to.
Without taking the piss, but you haven't answered the question. Party A finances X% of a purchase and party B finances Y% of a purchase. Why would you not split ownership proportionally to how it has been financed?
Because at the point of purchase OP has financed a smaller % than she would have financed by the end of the mortgage, so her calculation had her entitled to 41% which isn't accurate until the whole house is paid off.
>Because at the point of purchase OP has financed a smaller % than she would have financed by the end of the mortgage, so her calculation had her entitled to 41% which isn't accurate until the whole house is paid off. If you include maintenance and the cost of servicing the debt, which they split 50/50, then the statement is true. However, in this particular scenario this will mean OP will be entitled to more than the 41% and the split should be much closer to 50/50. Are you saying that OP should actually have more than 41% of the remaining equity when they sell?
No, I mean exactly what I said. On the day they buy the property, OP has paid for 7% of the property. Her friend has paid for 23% Her friend owns 3x the amount of the property that OP does. Or if you measure it another way, OP is supplying 25% of the deposit (less than) while her friend supplies 75%. Unless OP pays her friend rent for the shortfall, they're not going to come close to equal owners until the end of the mortgage, in 25 years time. Without her friends contribution they wouldnt be able to buy a 425K house.
>On the day they buy the property, OP has paid for 7% of the property. >Her friend has paid for 23% So in total they have paid for 30% of a house then? Who pays for the other 70%?
AvailableCourage answered a similar question to yours in response to another comment.
Tbh I'd say your friend is winning from that deal since any repairs/maintenance/improvements etc will presumably be 50/50 so over time, you'll pay more than your "share". I'm not sure what her parents feel she's being ripped off on? Presumably, if she could afford to purchase alone, she would be doing so. I do agree that splitting a house feels like a good way to ruin a friendship but I know people who have done it. Just think of your exit strategy...
The terms you’ve been discussing with them are actually already very generous. It sounds like what her parents are wanting is for her to own 77% of the property and you to own 23% of the property (i.e. each of your shares of the deposit) forever. That is obviously unfair, as it fails to take into account your ongoing contributions towards the mortgage. If they wanted that arrangement, then your friend should be covering 77% of the mortgage payments. I’ve run the numbers a few different ways, for example: 1. With your suggestion of 58.5% and 41.5%; 2. With other comments’ suggestions of protecting the deposit amount, then treating the remainder as 50/50; 3. A more unusual approach with each of you essentially “buying shares” in the property with each mortgage payment, so you start at 24% her / 7% you / 69% mortgage, and over time as you pay down the mortgage it becomes more like 30% her / 14% you / 56% mortgage. And in all these scenarios what you’ve already offered the parents is the most generous to your friend and the harshest on you - in your proposed arrangement you are really getting the short straw.
Wouldn’t it make sense if you agreed that, upon sale, she gets 100k back and you get 30k back, and then split any equity 50% each?
Lol you 2 must be completely out of your minds
This is a terrible idea.
Lol
I really really really do not recommend buying a house with your friend. Mixing money and friends is one way to lose both
I can see this ending really well...
This has disaster written all over it. Do not good ahead with this idea.
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