Q I was wondering if you could help. I am buying a house with my partner and we are trying to work out a fair process of splitting the profits on the house if we were to separate and sell but we are having difficulty working it all out.
The property costs £590,000 and I am providing a deposit of £235,000. We are taking out a mortgage of £442,500, which will allow us to pay for an extension soon after we move in.
Due to me earning less, we have agreed that he will pay 75% of the mortgage repayments and I will pay 25%.
We may both also contribute one-off payments here and there, and will keep a record of these.
How would we work out how to split the profits? We think it should be based on the proportion we each own at that point, based on our deposits and what we have both repaid, but we are having trouble with the calculations, especially as we have taken out the larger mortgage to pay for the extension. My partner was also wondering if the interest paid should be considered as he will be paying 75% of that, too. I didn’t think it should but I don’t know if this is unfair of me.
A No, it isn’t unfair of you to think that interest paid should not be taken into account. It shouldn’t, in the same way as interest not received by you on your £235,000 cash should be ignored when calculating your percentage shares in the property.
But back to your main question: you split the profits in accordance with your percentage shares in the property when you bought it. In your case, your cash contribution of £235,000 and your 25% share of the mortgage (£110,625) has bought you a 51% share in the property (using the total cost of buying the current property and its future extension, which is £677,500). So you would get 51% of any profits.
If you want to keep things simple and each have a 50% share – and so split any profits down the middle – you would need to take responsibility for £103,750 of the mortgage and pay 23.45% of the mortgage payment each month. Or you could decide that you’ll simply stick with your current arrangement and agree to split profits 50/50 in spite of your unequal contributions to the cost of the property.
• Want expert help finding your new mortgage? Use our new online tool to search 1000s of deals from over 80 lenders with the Guardian Mortgage Service, powered by L&C.