[Closed] Money conundrum!

She'd me getting 1/10th of the final equity after all costs of sale have been paid if it were me.

Edit - 50% of that 1/10th as she only contributed half in that one year anyway.

Yeah 50% of 1/10th was my initial idea.

I can see that going down like the Hindenburg...

It's family, it'll be miserable. Just pay up, and then make sure there's no further financial joint ventures.
My sister was given a reasonable amount of money to buy her first house in about 1988. She then remortgaged it with her then boyfriend and spent the money. He then traded her in for a new model and asked for his half of the remortgaged property. She went to my parents and they paid him off and paid off her mortgage. I knew nothing of this until a couple of years later. 25 years later she has lost all the money and rents a house. There's no point in being bitter, but as a consequence I have little to do with my sister because she always feels the need to put me down or make comments based on me working quite hard (apparently) and not having poured down the drain a decent sum of money that she hadn't earned.

But I don't see how she could rightfully expect any more. Did she contribute to any costs (insurance etc) or did she just walk away at the end of the first year and stop contributing?

Walked away from what I understand. No contribution at all since.

There will be no winners here. Whatever is calculated someone will not be happy. Money and families never end well.

I speak from experience.

It's a tricky one as I guess the sister is thinking that if her dad put £40k and there's roughly that left in equity then she should get 50%. Looks like she's not even considering the fact that your girlfriend has been paying the mortgage for 9 years, but I guess she's had the benefit of not sharing the property with anyone.

The £40k would need to be considered though and in percentage terms that now equates to about £34.5k, so I kind of see where the sister is coming from.

Surely the sister is entitled to half of the £40K that their dad put in less any loss in value.

Not 50% of the equity but a fair chunk of it as most of the equity in the property was fronted up by Pops.

I would say of the £56K that has been paid in,  £40K by Dad and £16K by your girlfriend  that they split the £20K loss to get to the £36K current equity and that that loss comes off the sisters  half of the Dads £40K

So the sister gets £20K from Dad initially  and takes a £10K loss in equity so she gets £10K when the house is sold.

^ True that - the 'girlfriend' gets the benefit of the gift from the dad and the 'sister' gets nothing.

Hmmmm

I think the loss in equity needs to be calculated in percentage terms of initial property value and current value rather than £20k.

I'm siding with the sister here.

The original deposit was 27.6% of the total, so you could assume each had equity of 13.8% at the start.  For the remainder of the time one has contributed 95%, the other 5%.  If you were to share all the risk, then the split could be 18.8% and 81.2%.

PP's reply is likely to be the least worst option...

Good luck!

I feel this is one of those things that should have been sorted 9 years ago.

I would imagine legally she's entitled to half as she is on the mortgage and deeds.

Would your girlfriend have got a £105,000 mortgage based on just her salary though? On a seeing the other side thing - you could argue that if she'd had to rent that would have cost her far more than a mortgage over 9 years.

The fair way would be 50% of the equity minus the 9 years of mortgage payments divided by 2 wouldn't it?

That way both sisters have payed out the same once all the sums have been calculated.

[b]johndoh[/b] wrote:

She’d me getting 1/10th of the final equity after all costs of sale have been paid if it were me.
Edit – 50% of that 1/10th as she only contributed half in that one year anyway.

The trouble with that calc is that the equity in the property is mostly (solely?) due to the initial deposit. With the figures given, the equity due to paying the mortgage is at most £16k, even if none of the fall in value is set against that. Hence that's all your girlfriend is really morally entitled to due to her making 95% of the mortgage payments. On that basis your girlfriend's offer of £10k actually seems about fair to me*, as that's half of the remaining equity which realistically has to be down to the contribution of the initial deposit.

Or to look at it another way, say their dad had given them £20k each directly and they'd both put it towards buying the house - would it be fair for the sister to get nothing? How is that morally different to what happened?

I have to admit to a bias here as I'm on the other side of the fence - the house I jointly own was bought using a sizeable deposit which I paid from money I inherited. Doubtless when we get onto that I'll have a thread on here, but I'm kind of resigned to only getting half of the equity back (when I reckon I should be entitled to at least the original deposit plus half of the remaining equity - in our case we contributed equally to the mortgage which is paid off).

* for one definition of fair - it's actually pretty generous to the g/f in allocating all the loss against the deposit.

The fair way would be 50% of the equity minus the 9 years of mortgage payments divided by 2 wouldn’t it?

No, because the girlfriend got the benefit of living in the property for 9 years.

Assuming the mortgage payment was in the range of £550 a month, her sister 'invested' £3300 10 years ago (in return for somewhere to live) and now expects £18k back...

Even by the standards of what most 'homeowners' think is fair that's taking the piss.

You can cut it a few ways, but my 2p:

Sister is entitled to nowt in return for her year of mortgage repayments, house prices fell nearly 17% from 2007 to 2008, sorry, can't win them all, but £275 a month was cheap rent anywhere, even then.

If we assume their Dad's Deposit was a gift shared equally. They started off with £20k each.

They bought a flat for £145k, now worth £125k - so they lost £20k of their initial investment to depreciation, she's got £10k left.

I think that probably the most generous way to split it 'fairly', but even that she's had all the benefits of home ownership and none of the liabilities, no need to maintain it, no need to insure it, no need to even pay for it, but it it buys peace, why not.

scrap what I just wrote.

Each recover their mortgage payments and then use the dads input to offset the losses and split the remainder 50%.

I can see why one expects more back from their investment but tbh in a case with property losing value they should just both be glad to get out what they put in.

[b]P-Jay[/b] wrote:

I think that probably the most generous way to split it ‘fairly’, but even that she’s had all the benefits of home ownership and none of the liabilities, no need to maintain it, no need to insure it, no need to even pay for it, but it it buys peace, why not.

Well apart from the benefit of the home providing a roof over her head that is - which is what the g/f has got in return for her 9 years of mortagage payments.

The sister is simply expecting to get back a share of the money their dad gifted them, which doesn't seem at all unreasonable if you consider that he gifted them £20k each and they both invested it in the house - the sister's contribution is £20k plus whatever mortgage payments she made, the g/fs mortgage payments have mostly gone on interest (which can be considered equivalent to paying rent).

[b]andyl[/b] wrote:

One way would be repay all the mortgage contributions to both (10 years to 1, 1 year to the other) and then split what is left down the middle.

So the g/f has effectively lived rent free and got most of the benefit of the deposit dad paid then?

The house is now worth £125k / £145k x 100 = 86.2% of what it was when they bought it.

The dad (effectively) gave the sisters £20k each.

This meas that the sister should get 86.2% of £20k = £17,240.

The sister probably has to accept that she's lost her (one year of 50%) mortgage contribution, but gets £17,240.

One way would be repay all the mortgage contributions to both (10 years to 1, 1 year to the other) and then split what is left down the middle.

But the girlfriend had the benefit of living in the property for 9 years.

I do think the fairest way is taking the initial lump sum from dad as a percentage of original vulvae, then applying that percentage to the equity and splitting 50:50. So £34,482 split 50:50.

yeah good point. Maybe need to work out what the equivalent rent would have been and split that element too? It's just going to be messy.

Maybe need to work out what the equivalent rent would have been and split that element too? It’s just going to be messy.

I think if you applied that theory the sister might end up with more money 🙂

the sister living there has still paid out on interest so if you only gave each back their capital input to the mortgage payments then all that should be left is the remainder of the dads contribution and the one living there would still lose the interest portion of their payments. I expect that would still be cheaper than the equivalent rent but someone going to be unhappy somewhere.

I do think the fairest way is taking the initial lump sum from dad as a percentage of original vulvae, then applying that percentage to the equity and splitting 50:50. So £34,482 split 50:50.

This +1. It is the same as what I was saying. £34,482 split 50:50 gives the sister £17,240, which is what I said.

 I would say of the £56K that has been paid in,  £40K by Dad and £16K by your girlfriend

That £16K is the gap between the original mortgage advanced and the value of the outstanding mortgage now, the amount paid in should be considerably more (interest?)

I would say 50/50 on the amount dad put in and 1/10th of what ever other equity there is.

but if they go 50/50 on the £40k the dad put in then the one who has not been living there will get the full £20k without any reduction due to the initial bad investment they both made together. Thats not a criticism, it just ended up as a bad investment due to what unfolded and they both made that decision 10 years ago.

either use the dads £40k to fully cover the losses and split what is left from that £40k between them do split it when reduced as a ratio of the proportion of the original value (40k our of 145k).

If they each take out what capital they have paid off in mortgage payments and then split the rest (remainder of the dads) then yes the one living there may well have effectively had 9 years cheap rent (ie the mortgage interest) but both have learnt something and got out with more than they put in thanks to dad covering the losses. As well as a valuable lesson!

To give a bit of context over how this discussion is likely to go...

We went out for a family dinner a few months ago for the sister's birthday. The sister's child is autistic and he didn't react well to the restaurant so the grandfather took the child home. He left money for the meal and some drinks afterwards when he left.

When the bill came and the mother went to pay the bill, the sister clocked that her father had left less money than he had given my girlfriend for her birthday dinner and drinks a few weeks prior (bare in mind these are women aged 38 and 41)

In the middle of the restaurant the sister phones her dad to berate him for giving her less money than he did for my girlfriend and demanded that he transferred the difference to her bank account immediately. At this point I'm up the other end of the table with my head in my hands wishing the ground would swallow me up...

To say the sister is money obsessed is an understatement. Thankfully my missus is super chilled and laidback but I'm conscious that she will get bullied into giving more than she should

just putting some figures to it..

Loss in value £20k

Dads cont. £40k

Equity currently £36k

Use dads cont. to cover £20k loss resulting in £20k left so equity made up of £16k mortgage contributions and £20k dads cont.

Each gets 50:50 of remaining £20k from dads cont. = £10k

£16k over 10 years = £1.6k a year. 1st year £1.6k/2 = £800. Remaining 9 years payments = £14,400

One who has lived there gets: £10k + £800 + £14,400

One who hasnt gets: £10k + £800

You could work it all out with a % ratio of the dads contribution which I suspect would result in the one who didn't live there getting more money.

Would the capital payments be the same each month? I guess another way to work it out would be find out the exact capital payments each month etc etc. The above is just an example.

May I suggest a roof for her stats?

To say the sister is money obsessed is an understatement. Thankfully my missus is super chilled and laidback but I’m conscious that she will get bullied into giving more than she should

Doesn't change things at all.  It's not about being bullied.  Your girlfriend got to use the flat for 9 years, fairest way is to split 50:50 what the £40k is worth now.  The sister could suggest that over the 9 years she could charge your girlfriend what she lost in potential rental income.

The % route would be..

Property value now 86.2% of original so dads £40k now only worth £34,500.

Each gets 50% of that so £17,259

Of the £36k all that is then left is £1500.

£1500 / 10 = £150. £150/2 = £75.

GF gets: £17,250 + £75 + 9x£150 = £18,675

Sister gets: £17,250 + £75 = £17,325

Personally I think your GF was right with the £10k offer going on my calc. above.

Best case up it to £10,800 but then you will have sales costs to cover too which need to be split.

If the sister wanted more then she should have been contributing to the mortgage instead of lumping your GF with it.

Do you take the equivalent rental cost that your OH has saved into account?

What portion of that equity has she actually paid down above & beyond what it would have cost to rent (which is, I assume, what your OH sister was doing)?

I'd consider something along the lines of, OH gets back the capital she has paid down over & above a similar rental.

Split the remaining equity 50/50.

<span style="color: #444444; font-size: 12px;">"But the girlfriend had the benefit of living in the property for 9 years."</span>

And fully paying the mortgage herself for those 9 years.

Let's say the mortgage is £500 a month. Over the 10 year period the sister would have contributed £3000 and my girlfriend has paid £57,000.

That alone is enough to rule out a 50/50 split

I'd guess rental would probably be around £500 for a flat that value, assuming 2 bedrooms, so over the 9 years £54k.  I think your girlfriend has done okay out of it.

That alone is enough to rule out a 50/50 split

It's enough to rule out a 50:50 split of the full equity, but the £40k that dad put in needs to be split 50:50 at it's current value. They can argue over the other £1500.

Your girlfriend got to use the flat for 9 years, fairest way is to split 50:50 what the £40k is worth now.  The sister could suggest that over the 9 years she could charge your girlfriend what she lost in potential rental income.

+1 The sister should get £17,240 (or maybe a little more for the one year of 50% mortgage contribution).

If the mortgage was £500 a month it should have cleared a lot, lot more than £16,000 off the mortgage balance over 10 years.

[b]andyl[/b] wrote:

Sister gets: £17,250 + £75 = £16,325

😆

Apart from that mistake it does seem to be what everybody else is suggesting and actually the fairest split taking everything (initial dad contribution, 9 years rent free living, loss of equity etc.) into account.

The alternative being genesiscore's suggestion, but that will probably work out less favourably for your g/f given dad sounds like a generous softy.

The only relevance of the sister's attitude to money is that she's unlikely to settle for less than that (assuming she's intelligent enough to make those calcs).

i was thinking an average of £400 a month as rent.

Without knowing what the interest payments are it is hard to say but I can't see it being £400 a month so yes the GF could come out of it well but she was lumped with the flat and mortgage.

Maybe the % calc above of £18k and £17k would be fairer but without knowing the mortgage interest payments and the living situation of the sister it is difficult to make a call on that too.

What if the sister shacked up with someone who already had a house or went back to the parents and lived rent free?

what mistake? I see no mistake 😉

<span style="font-size: 12.8px;">“The sister is simply expecting to get back a share of the money their dad gifted them, which doesn’t seem at all unreasonable if you consider that he gifted them £20k each and they both invested it in the house – the sister’s contribution is £20k plus whatever mortgage payments she made, the g/fs mortgage payments have mostly gone on interest (which can be considered equivalent to paying rent).”</span>

By following the calculation I suggested she gets just that - she invested £20k of her Dads money into half a flat worth £145k It's now worth £125k, she lost £10k.

I can't think of any other way to split it where sisters gets more than that being remotely fair - IF, and it's a big IF, she had being paying 50% of the interest element of the mortgage for the last decade then she could argue more, but she didn't - she walked - does she deserve more because she borrowed against a depreciating asset interest and repayment free for 9 years?.

I doubt legally she could argue 50% of equity, it would be akin to divorce, she'd never get 50% through arbitration.

OPs GF can simply give her and extra £8k to save an argument, but frankly it sounds like she needs to be told 'no' over, and over and over again until she accepts she cannot have the things she wants just because she wants them.

Why didn't they get her name taken off the deeds when she moved out?

Tell her she can have half of the equity on receipt of payment of the nine years' worth of mortgage repayments she's failed to make on the flat she part-owns.

[b]andyl[/b] wrote:

If the sister wanted more then she should have been contributing to the mortgage instead of lumping your GF with it.

and as keeps being pointed out, she also lumped the GF with the benefits of living in the house - it's for that benefit that people tend to pay mortgages and not pay them when they don't live somewhere.

[b]BoardinBob[/b] wrote:

Let’s say the mortgage is £500 a month. Over the 10 year period the sister would have contributed £3000 and my girlfriend has paid £57,000.
That alone is enough to rule out a 50/50 split

No, it's not, because you're ignoring the benefit she's got from living in the house. Unless you think she should effectively have been living there for free subsidised by dad's deposit?

Tell her she can have half of the equity on receipt of payment of the nine years’ worth of mortgage repayments she’s failed to make on the flat she part-owns.

And then charge the girlfriend 50% of the rent for the property. That should work out around exactly the same.

Why didn’t they get her name taken off the deeds when she moved out?

Presumably because the GF wasn't prepared to cough up £20K to compensate the sister for her half of the Dad's gift at the time?

Genisiscore502011 is correct. Whatever is left from the sale, give it back to pops.

My position is a good chunk of the initial £40k deposit is immediately wiped out by the decline in value of the property. £20k of it is immediately written off so that leaves £20k to split. That should then be weighted by contribution over the years in terms of not only the mortgage but council tax, insurance, factors bills, upkeep and decoration etc

Either way it's a bloody mess and should probably have been agreed in advance about what would happen when this issue arose, but folk never seem to consider these things at the time. As I said, I have no financial interest at all. I have my own place, I'm sorted financially etc so none of this money will ever come my way.

Oh, and,

Surely the 40k deposit is misleading here?  They have a £105k mortgage between them,  the flat is worth £125 so for all practical purposes it's actually appreciated in value by £20k as far as they're concerned.

<span style="color: #444444; font-size: 12px; background-color: #eeeeee;">If the mortgage was £500 a month it should have cleared a lot, lot more than £16,000 off the mortgage balance over 10 years</span>

A thirty year mortgage...

<span style="color: #444444; font-size: 12px;">Surely the 40k deposit is misleading here?  They have a £105k mortgage between them,  the flat is worth £125 so for all practical purposes it’s actually appreciated in value by £20k as far as they’re concerned.</span>

Good point

Ach, I'm staying out of it. It'll be world war three at some point. The lot of them fall out at the drop of a hat so I'm going to keep schtum

There's arguments both ways but 50% does seem the simplest and they both come out ahead in what could've been a very bad investment. Just make that 50% once all costs are taken into account

Oh, and, and,

Whatever you do decide to pay her (based on what I said earlier 10K seems fair), make sure it's enough to cut the grubbing cow out of your life.  She sounds toxic, family or no.

My position is a good chunk of the initial £40k deposit is immediately wiped out by the decline in value of the property.

Why would you take the decline in value out of the deposit only, the decline in value is over the whole £145k, not just the £40k. Not sure how you could think that rule could apply.

[b]P-Jay[/b] wrote:

By following the calculation I suggested she gets just that – she invested £20k of her Dads money into half a flat worth £145k It’s now worth £125k, she lost £10k.

She invested £20k of dad's money for a 20/145 share of the value of the flat - not of the equity of the flat. If the flat is now worth £125k then that share is now worth 20/145 x 125 = £17,241.38. The only way she could have lost half that investment is if the flat is now worth £72,500

I doubt legally she could argue 50% of equity, it would be akin to divorce, she’d never get 50% through arbitration.

No, but I'm sure she could legally argue a 20/145 share of the total value of the flat.

using the MSE calculator, £105k for 35 years at 4.5% gives £89k remaining after 10 years and monthly payment of £497. (totally guessing at interest and term here)

That is a total of £59,640 over 10 years. Of which £16k was capital so £43,640 in interest.

So interest averages out at £363 per month effectively for "rent" that your Gf has been paying so not a staggeringly low figure but probably lower than she would have spent on rent unless sharing which she may well have done instead of buying for the sister to then pull out.

Real question is - how far is your girlfriend prepared to go to get what she feels is right? Get solicitors involved and they could both kiss goodbye to any money.

FWIW, in the 9 years since the sister last lived there and contributed anything, she's been living mortgage free with her partner as he bought their house for cash with an inheritance.

[b]BoardinBob[/b] wrote:

FWIW, in the 9 years since the sister last lived there and contributed anything, she’s been living mortgage free with her partner as he bought their house for cash with an inheritance.

Which is also completely irrelevant - though if it had any relevance at all, I presume the sister has no financial interest in the house she currently lives in.

she’s been living mortgage free with her partner as he bought their house for cash with an inheritance.

That's of absolutely no relevance. Apart from the fact that your girlfriend benefited by having the flat to herself.

The consensus seems to be 50/50 so maybe 10k to put it to bed isn't the worst deal and probably not worth fighting too much about!

<span style="color: #444444; font-size: 12px;">I presume the sister has no financial interest in the house she currently lives in.</span>

No, she's on the deeds for 50/50...

30 year mortgage would be at 6.5% for £89k left after 10 years which seems a bit high but when I remortgaged back then I was paying £600 a month in interest on a £130k mortgage. thankfully that dropped to a variable at 1.5% above base when the everything went belly up as I was a student with 3 part time jobs to pay my mortgage and the drop from £600 to £180 a month interest was the only thing that kept my head above water.

Those figures would give a mortgage of £664 a month so £79,680 total so £530 a month interest on average over the 10 years. I would say that would probably easily cover the rent of a £125-145k property.

50/50 shares in two seperate houses for paying half a mortgage for a year?

Lucky girl.

If the sister is happy to get £10k then she's daft, and your girlfriend has done very well out of it.

[b]BoardinBob[/b] wrote:

No, she’s on the deeds for 50/50…

😮 - how did she wangle that when he paid for it all? I wouldn't personally have done that (see upthread for my situation, though in my case my inheritance paid for far less than half the cost of the house so it's rather different).

the sisters living situation is irrelevant but it's good to know if she comes back with the argument "but you have had cheap rent for 10 years..." as your Gf can throw it back in her face that she has had no rent for 9 years!

<p style="padding: 0px; border: 0px; outline: 0px; font-size: 16px; vertical-align: baseline; background: #eeeeee; line-height: 1.2em; color: #444444; margin: 1rem 0px !important;">50/50 shares in two seperate houses for paying half a mortgage for a year?</p>
<p style="padding: 0px; border: 0px; outline: 0px; font-size: 16px; vertical-align: baseline; background: #eeeeee; line-height: 1.2em; color: #444444; margin: 1rem 0px !important;">Lucky girl.</p>

And probably a brand new £50k Mercedes on lease (insert rolleyes)

<span style="color: #444444; font-size: 12px; background-color: #eeeeee;"> – how did she wangle that when he paid for it all? I wouldn’t personally have done that (see upthread for my situation, though in my case my inheritance paid for far less than half the cost of the house so it’s rather different).</span>

It's fair to say there's a catalogue of errors along the way here. Nothing in writing, 30 year mortgage!!!, lack of clarity over anything, blagging her way onto the deeds for a property with no mortgage etc.

[b]Gary_M[/b] wrote:

If the sister is happy to get £10k then she’s daft, and your girlfriend has done very well out of it.

+1 - if sister will take that I'd snatch her hand off. I note it's only what your g/f is suggesting offering though, and if sister is as money grabbing as suggested I'd be surprised if she does settle for that (if that's the outcome you want I suggest making a very careful argument for that case being more than generous).

No idea how I did the big smiley but it's apt 😆

blimey - I read the OP's description and thought it would be easy, but from the discussion it's clearly not.

Seems to be all down to where you consider the losses should be covered

- by the initial investment?

- by the payments being made on the mortgage?... and then on top of it how to you cover the idea of "rent" for one sister living in the house, and one not.

I have to admit, I'm struggling with how to deal with it, and with the OP the best of luck that it goes smoothly for the sisters and he gets lives a happy stress free life.

Invite sister round for dinner, install a new patio. Sell house.

I'm quite liking one of the suggestions above.

Remove the father's contribution from the equation and essentially they had a mortgage for £105k

The property is now worth £125k so split 50/50 they are due £10k each from that element alone

In addition the mortgage is £89k so there's an additional £16k to be split (£105k-£89k)

Going on the basis of the mortgage contributions over the years (and I'm just using £500 as a rough guide, I don't know the exact figure or how it's fluctuated) then the sister has contributed 5% of the total mortgage payments over the 10 years so she should get 5% of the £16k which is £800 so in total the sister gets £10,800.

THEN, if either one wants to give some money back to their father then that's a separate discussion they should have with him.

"as a percentage of original vulvae" [insert shocked smiley]

So that'll be half each, I presume?

I'm reminded of some friends divorce settlement, they had got everything settled apart from last £10k, friends told them to split and give £5k to each of their kids - but oh no they spent £8k arguing about it.

The one who paid the mortgage received benefit of living in the place so just split 50/50 after selling costs, the conveyancing solicitors will be duty bound to follow this route unless instructed by both parties to do otherwise anyway.

& Yes I am expecting to be in a not dissimilar situation later this year 😕

Looks like the max you want the sister to get, even though you're staying out of it, is £10k.

It's not the fairest deal, as your refusing to accept the fact that your girlfriend benefited from living in the property for 9 years, but if the sister accepts it then happy days.

I’m reminded of some friends divorce settlement, they had got everything settled apart from last £10k, friends told them to split and give £5k to each of their kids – but oh no they spent £8k arguing about it.

My sister's in a similar battle, I had to lend her £10k so she could pay a barrister to fight for er £10k. It's all about winning though it would seem.

<span style="color: #444444; font-size: 12px;">It’s not the fairest deal, as your refusing to accept the fact that your girlfriend benefited from living in the property for 9 years, but if the sister accepts it then happy days.</span>

I get the living there benefit but consider this.

Total mortgage payments since day 1 total £60k (for illustration) and the sister has contributed £3k of that

As long as the sister gets more than £3k back then she's gained from the situation whereas my girlfriend would only gain (financially) is if she got back more than the £57k she's paid towards the mortgage so yes she did benefit but it wasn't free!