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House Purchase and equity share
6 Answers
Hi,
I have bought a house with a friend (no mortgage). I ended up paying in £7,000 more than my friend, I contributed £65,000 and my friend £58,000. I had to sell my car for the extra £7,000 we needed.
We decided to rectify the equity share after we'd moved in so I could get my money back, by getting a small mortgage. Now it is time and my friend seems to think if he gives me £3,500 we are all square (each having 50% equity). However, I can't get my head around having paid in £7K and only getting £3.5K back. I thought we should get a mortgage for £20K, I get my £7k back and we split the remaining £13K. But who then pays for the £7K element of the mortgage? Not me, as I'd be paying for getting my share back.
Can someone please help my scrabbled brain?
I have bought a house with a friend (no mortgage). I ended up paying in £7,000 more than my friend, I contributed £65,000 and my friend £58,000. I had to sell my car for the extra £7,000 we needed.
We decided to rectify the equity share after we'd moved in so I could get my money back, by getting a small mortgage. Now it is time and my friend seems to think if he gives me £3,500 we are all square (each having 50% equity). However, I can't get my head around having paid in £7K and only getting £3.5K back. I thought we should get a mortgage for £20K, I get my £7k back and we split the remaining £13K. But who then pays for the £7K element of the mortgage? Not me, as I'd be paying for getting my share back.
Can someone please help my scrabbled brain?
Answers
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Your maths is definitely faulty. At present you have paid out £65k towards the property and your friend £58k.
If your friend gives you £7k, then he has put in £65k and you £58k (reversing the above situation). But if he gives you £3.5K, then he has paid out a total of £61.5k – as have you, making things all fair and square.
If your friend gives you £7k, then he has put in £65k and you £58k (reversing the above situation). But if he gives you £3.5K, then he has paid out a total of £61.5k – as have you, making things all fair and square.
Let's take the £ 20,000 mortgage first. You and your friend each have a half share, so you receive £ 10,000. Your friend also receives £ 10,000, what they do with it is immaterial.
Now for the house.
This had a value £ 65,000 + £ 58,000 = £ 123,000. So each half share is £ 123,000 / 2 = £ 61,500.
If your friend gives you £ 3,500 (from the mortgage or another source), you will have paid £ 65,000 - £ 3,500 = £ 61,500 for your half share. Your friend will have paid £ 58,000 + £ 3,500 = £ 61,500. So both have paid the same, exactly half the house's value.
It doesn't matter whether you think the £ 3,500 is taken from the mortgage money or another source, it doesn't matter. From your point of view, think of the house purchase and mortgage as two separate transactions, that will save confusion.
Now for the house.
This had a value £ 65,000 + £ 58,000 = £ 123,000. So each half share is £ 123,000 / 2 = £ 61,500.
If your friend gives you £ 3,500 (from the mortgage or another source), you will have paid £ 65,000 - £ 3,500 = £ 61,500 for your half share. Your friend will have paid £ 58,000 + £ 3,500 = £ 61,500. So both have paid the same, exactly half the house's value.
It doesn't matter whether you think the £ 3,500 is taken from the mortgage money or another source, it doesn't matter. From your point of view, think of the house purchase and mortgage as two separate transactions, that will save confusion.
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