You don't need to be an 'investor' to invest in Singletrack: 6 days left: 95% of target - Find out more
Worst case is 50/50 of the end which is £18k each (minus selling costs) so the GF loses £7200 compared to the best case for her. that is small change when dealing with houses, and thats before you have one that has dropped in value.
9 years rent free is quite a benefit.... 🤔
<span style="color: #444444; font-size: 16px;">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>
But the GF also paid a lot of mortgage interest in those 9 years which, depending on interest rates could have easily been the same a similar rental but with all the risks of property repairs etc.
Total mortgage payments since day 1 total £60k (for illustration) and the sister has contributed £3k of that
But that would be what you girlfriend would be paying had she lived in a rented flat.
<span style="color: #444444; font-size: 16px; background-color: #eeeeee;">9 years rent free is quite a benefit…. </span>
Yes, the sister has had 9 years rent free living with the new fella!
the GF hasnt as she has been paying the mortgage interest.
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
I'm not really seeing how that's relevant. She's been paying to live there for ten years, paying all the bills, repairs and maintenance.
"<span style="color: #444444; font-size: 12px;">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"</span>
Sorry, I can't agree. You don't get to invest in property with borrowed money, not pay a penny of interest in 9 years and then have it all it back minus the depreciation - not to mention it wasn't even her money in the first place.
I mean, the flat's lost £20k in 10 years, the GF has had to cover the payments, maintain the place (admittedly living there too) and Sister takes £700 less, nah.
Look at it another way - say Dad didn't help out and they got one of those 100% mortgages that were available in 2007. Even forgetting the much larger repayments - they'd currently be about £5k in negative equity - does calling up sister and saying "remember the flat you left 9 years ago? Yeah I want £2500 off you so I can get rid". seem fair?
Legally - all the sister has to do is sit back and let the 50% after costs roll in, anything less will be an uphill unwinnable battle.
The fact that the sister has been paying no rent is irrelevant.
But that would be what you girlfriend would be paying had she lived in a rented flat.
So? She wasn't, she was paying a mortgage.
I think you could come up with calculations, and "reasonable" justification, to support any amount.
The sister could reasonably argue that she'd effectively loaned your gf £20k, and expects that back + interest.
Half the equity doesn't really seem too unreasonable. I mean, I see how it seems unfair, but the sister could have asked to be bought out when she stopped living there, so your gf has benefited.
Think about it this way - if your employer gave you a house to live in rent free it would be classed as a taxable benefit.
If you really wanted to do the calculation properly then consider all the girlfriends costs over the 9 years including the mortgage payments, consider the rent she would have been paying if she hadn't stayed in the property or rental at that property, subtract one from the other (which will be roughly the same amount anyway), then split what's left 50:50 after selling the property. That way you take out all the girlfriends costs and the benefits out of the equation.
[b]BoardinBob[/b] wrote:
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
I'm sure you do, but it's an argument which is ignoring the capital share bought with the initial £40k - the capital share which is shared equally between the sisters and comprises 40/145 of the capital value (not equity) of the flat.
It's not actually as complicated and difficult as some are making out (well it's only complicated or difficult if you want to somehow assign a larger share to the gf because she's been paying the mortgage whilst ignoring her rent free living). Simply assign shares in the flat in proportion to the contribution made to the original purchase. Hence 40/145 share to the deposit (or 20/145 share to each sister), 105/145 share to the mortgage. Divide the sale proceeds in those proportions, with the 105/145 share for the mortgage firstly going to paying off the mortgage and any remainder split according to the proportion each contributed to the mortgage (if you really wanted to get picky about it, you could calculate the exact amount of mortgage capital paid by each - clearly the sister contributed less than 5% as more of the first year's payment went on interest).
I think you could make a legal argument for that split, though I'll defer to Dickyboy's advice that in reality given a 50/50 ownership of both flat and mortgage it's going to be tricky for g/f to get more than 50% of the equity.
Love some of the posters calculations and perception of right and wrong. edd and Gary_M got it right on the first page. The flat went down in value so mortgage payments, insurance and maintenance are just paying rent, so this.
"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."
<span style="color: #444444; font-size: 16px; background-color: #eeeeee;">The sister could reasonably argue that she’d effectively loaned your gf £20k, and expects that back + interest.</span>
No she didnt. She entered a house purchase 50:50 and was living there but then moved out. If originally the sister was never meant to live there then yes she loaned her £20k.
but then, without an agreed rate of interest it would be an investment, which turned out to be a bad one so she gets 86% of £20k = £17,200.
Best case for GF is £10,800 to sister.
Worst case for GF is £18,000 to sister.
Dad is the real loser as he's given away £40k in all this and got two daughters who probably wont speak for a long time after this.
[b]andyl[/b] wrote:
Yes, the sister has had 9 years rent free living with the new fella!
the GF hasnt as she has been paying the mortgage interest.
[b]Cougar[/b] wrote:
I’m not really seeing how that’s relevant. She’s been paying to live there for ten years, paying all the bills, repairs and maintenance.
You guys are double counting now. Either the gf has been paying for living in the house for 9 years, or she's been contributing towards the capital on the house - you can't have it both ways, if the argument is that the gf is entitled to 95% of the equity because she's paid 95% of the mortgage then you can't ignore the benefit she's got from living in the house (the easiest way to calculate the value of that benefit is the equivalent rent). Sure "rent free" may be inaccurate but it's a counter to the suggestion that her payments entitle her to the equity in direct proportion to the payments ignoring the other benefits she's been getting.
Though as I just explained above, that argument makes things way to complicated - the most accurate and simple way is to split the flat into effective shares at the point of purchase.
Oh dear its not going to end well, been there several times, just pay her off and learn from it. It could have been a lot worse...like if u had to divvy up a 100k gain.
In future, always draft an agreement who owns what, a x year lock out clause, what happens if 1 dies etc.
Good luck btw, i d let the dad decide it was his cash.
Here's another way of looking at it. The 2 sisters bought a house together then the sister buggered off after 1 year with her boyfriend and my girlfriend was left with the full burden of the mortgage for 9 years.
Interesting mess, your girlfriend should probaby prepare for never speaking to her sister again. Families and money do not mix!
How about -
(Sale of flat - fees - mortgage balance at the time the sister stopped paying) / 2
So probably about 10k still
[b]poolman[/b] wrote:
Oh dear its not going to end well, been there several times, just pay her off and learn from it. It could have been a lot worse…like if u had to divvy up a 100k gain.
In future, always draft an agreement who owns what, a x year lock out clause, what happens if 1 dies etc.
Yeah, yeah. Not quite 100k here, but had we done a formal agreement at the start it would make rather more difference to me than what the OP's gf is fighting over. Though on reflection, I'll probably let it go (this thread has actually helped in a way to make me think about it), because not only will my kids still be living here and I don't want to mess them around too much, but assuming my current business works out I will still be able to afford to get somewhere new myself and there's a realistic expectation we'll both end up leaving money to our kids, so any money at all spent on lawyers is coming straight out of their inheritance.
Good luck btw, i d let the dad decide it was his cash.
Seems like the best advice - though if I was dad I'd want to stay well out of it!
Cougar you are missing the point.
GF has paid 95% of the capital that has been paid off
+ she has paid 95% of the interest on the loan so far
We are not suggesting she gets all the interest back as well out her sisters share of the equity, just that the capital repayment is returned to who paid it. This would be a best case for the GF and worst case for the sister.
Either way the difference is only £7k.
Splitting it into shares at the point of purchase doesnt work as the Gf has been paying off capital for 9 more years and thus would be buying shares from the bank who owned £105k of the house value in shares at the start so your argument ends up being the same as them each taking back their capital payments from the mortgage and splitting the rest.
[b]BoardinBob[/b] wrote:
Here’s another way of looking at it. The 2 sisters bought a house together then the sister buggered off after 1 year with her boyfriend and my girlfriend was left with the full burden of the mortgage for 9 years.
We've already done that one - your gf was also left with the burden of having somewhere to live for 9 years and paying no more for that than the equivalent rent.
Simple question - going back 9yrs could your GF have got a £105,000 mortgage based on her salary alone?
Here’s another way of looking at it. The 2 sisters bought a house together then the sister buggered off after 1 year with her boyfriend and my girlfriend was left with the full burden of the mortgage for 9 years.
Why was it a burden, was she forced to live there or could she have rented it out halved the costs and halved the income with the sister. Over the 9 year period did the girlfriend say to the sister 'you've left me with this burden of a mortgage, what should we do about it'? Or did she just enjoy living there and now as it's come to share the profit she's created the 'burden'.
As I said earlier take the girlfriend living there out of the equation by adding up all her costs over the last 9 years, subtracting what it would have cost if she'd stayed there as a tenant, take that off the equity then split 50:50. It may mean your girlfriend is worse off.
[b]andyl[/b] wrote:
GF has paid 95% of the capital that has been paid off
+ she has paid 95% of the interest on the loan so far
We are not suggesting she gets all the interest back as well out her sisters share of the equity, just that the capital repayment is returned to who paid it. This would be a best case for the GF and worst case for the sister.
Which only works if you assign all of the loss in value to the original deposit, and none to the mortgage. I'm not sure why she should get back all of her capital repayments on a depreciating asset.
Let's try an analogy here. Say the house was now only worth £90k - should the gf get back the £16k of capital she's repaid on the loan by demanding £15k from her sister? How about if the house was worth £100k - what would you say a fair split of the £11k resulting equity? I'd be really interested to see your calculations.
Splitting it into shares at the point of purchase doesnt work as the Gf has been paying off capital for 9 more years and thus would be buying shares from the bank who owned £105k of the house value in shares at the start
Yes, exactly.
so your argument ends up being the same as them each taking back their capital payments from the mortgage and splitting the rest.
No, it doesn't. The fallacy in your argument there is that the £105k bank share is no longer worth £105k.
this is why any time I have borrowed money from family I have insisted on a written agreement - one of which resulted in me borrowing £3000 and two years later paying back 5800 to my dad. ( deal was based on a % of the value)
how about we throw this in also:
So what if when the sister moved out they decided to sell. Only the market had just crashed and the flat was worth £100k and in negative equity.
On selling they both would have nothing except a bill for a few £1k each.
Maybe by keeping the flat going and paying the mortgage the sister has allowed the value to rise a bit and paid off £16k of equity so the flat is no longer a loss and the sister should be glad of getting something back.
Just saying like! 😉
for an easy life - 50:50 and be done with it.
If £5-7k is something your GF wants to fight over then hopefully you have some arguments to put forward to try and justify it.
[b]P-Jay[/b] wrote:
Sorry, I can’t agree. You don’t get to invest in property with borrowed money, not pay a penny of interest in 9 years and then have it all it back minus the depreciation – not to mention it wasn’t even her money in the first place.
The only borrowed money was the mortgage from the bank. Which is being paid off as a result of the sale. The money from dad was a gift - so she's invested the £20k gift from her dad in the flat, unfortunately it's devalued but she still gets back the devalued proportion of that. The only alternative (if they don't repay dad) is for the gf to take sister's share of that gift.
Look at it another way – say Dad didn’t help out and they got one of those 100% mortgages that were available in 2007. Even forgetting the much larger repayments – they’d currently be about £5k in negative equity – does calling up sister and saying “remember the flat you left 9 years ago? Yeah I want £2500 off you so I can get rid”. seem fair?
Which would be a completely different argument - though the interesting thing is that it actually supports my calculation, because in that case all of the depreciation would be assigned to the share of capital owned by the mortgage and allocated according to payments made (so in theory with my calcs gf could call up sis and ask for £250).
<span style="color: #444444; font-size: 16px; background-color: #eeeeee;">No, it doesn’t. The fallacy in your argument there is that the £105k bank share is no longer worth £105k.</span>
My argument was based on using the fathers £40k to write off the loss which keeps it simple and you can see exactly how much each sister has paid off out of their own pocket.
If you borrow £105k from the bank they want their £105k back with interest and a cherry on top. they don't let you off the 24% drop in your property value. the original loan was still £105k. If you want to apply the % drop to the share value then you need to do that for each month based on the value of the property and thus the "shares" at that time the mortgage payment was made.
They should wrestle for it.
In jelly.
Winner takes all.
Post video
[b]andyl[/b] wrote:
My argument was based on using the fathers £40k to write off the loss which keeps it simple
It does, but I thought we were trying to be fair?
The sister is owed 50% of the equity in the house on the day she moved out.
I wonder what the situation would be if there was negative equity in the flat, would the girlfriend be happy to pay more because she's been paying the mortgage and happy for the sister to only pay a proportion based on the time she lived there?
Or would she be going to the sister and asking her to pay 50% to clear the mortgage.
The girlfriend took on that responsibility. For the sister to have 50% claim, she and girlfriend should have worked out fair* rent and girlfriend paid that to the sister while sister still pays 50% of the morgage.
*However you determine fair.
<span style="color: #444444; font-size: 16px; background-color: #eeeeee;">I wonder what the situation would be if there was negative equity in the flat</span>
I was wondering that. Fortunately that hasnt happened or the forum would go into meltdown!
I did suggest above the idea that the flat was only very slightly in positive equity - ie worth £90k. Which might avoid the complications of negative, but does also blow away the argument that the gf is entitled to £16k off the top because that's how much the mortgage has beep paid down.
The simplest solution is half each (which appears to be the default if they can't agree). I still think the most accurate is to assign shares at the time of purchase.
50% of equity at the point sister left is an interesting argument and has merit, but would only really apply if they'd actually agreed to do it at that point and gf had paid her off.
but would only really apply if they’d actually agreed to do it at that point and gf had paid her off.
I think the op would only apply it if it came to £10k 🙂
You have to consider that your GF may have been paying lower mortgage payments than the equivalent rent on a similar property. And the sister has presumably had to pay something to live elsewhere.
So I'm not sure paying the mortgage for X years counts for as much as it might appear at first glance.
I'd be inclined to think a 50/50 split on the equity was the fairest solution TBH.
There was significant negative equity for a while hence why they couldn't sell when the sister moved out as the hit would have been huge, and on their own their salaries would not have got them a £105k mortgage each
If you want a real laugh, the pair of them are qualified conveyancing paralegals so you think they would have had all this stuff sewn up watertight well in advance given they do it for a living every day (at least my girlfriend does, her sister hasn't worked in 8+ years) 😆
Sorry not sure this has been asked yet.
What would have happened if the sister had asked for her share of the dad's 40k gift/deposit back earlier ?
Maybe she would have bought Bitcoin ??
That means your GF owes her about a gazillionbilliontrillion bucks .... 🙂
Good luck
Taking the money grabbing personality aspect out of the equation and working on a few assumptions I think the sister is entitled to about half the equity.
This assumes that the £40k gift from dad was essentially £20k each. It also assumes that dad did not give any future big generous gifts to sister to set her up in second or subsequent homes.
So assuming the gift was a shared £40k and has not been repeated since then I think of it like this.
Your girlfriend has enjoyed the benefit for 10 years of having her sisters £20k lowering her mortgage payments and has had a nice place to live for this time.
In this situation I think expecting "her" £20k back is not unreasonable. But there isn't £20k as the loss in equity should be soaked up out of the £40k that dad put in.
Legally the sister is probably entitled to half the equity, so you have to ask is this worth a big family bust up.
If it were me I would give her the £18k or so and just be happy that I had the full benefit of "borrowing" her £20k for 10 years.
Can they sue each other for negligence? £10k sounds about right 😉
It also assumes that dad did not give any future big generous gifts to sister to set her up in second or subsequent homes.
You assume wrong! There's another property out there in the sister and partner's name, that the father gave them money towards. It's just been sold and "some" money is due back to the father, but again it's all completely undocumented and undefined.
<span style="color: #444444; font-size: 16px;">Your girlfriend has enjoyed the benefit for 10 years of having her sisters £20k lowering her mortgage payments and has had a nice place to live for this time.</span>
She didnt loan it to her, they entered a house purchase together, then the sister decided to not live there anymore.It was in the sisters best interests to keep the property until the value had recovered.
GF has also put in £16k of her own money to bring the equity to £36k. If they had gone interest only then that equity would only be £20k.
If it was considered a loan then either work out what £20k would have got you in the last 9 years or work out the interest saving on the mortgage overthat period for £125k rather than £105k.
You assume wrong! There’s another property out there in the sister and partner’s name, that the father gave them money towards. It’s just been sold and “some” money is due back to the father, but again it’s all completely undocumented and undefined.
Again that's not relevant, it's between the dad and that sister. Nothing to do with this property.
Again that’s not relevant, it’s between the dad and that sister. Nothing to do with this property.
I never said it was relevant. I'm replying to a direct comment. 🙄
I’m replying to a direct comment.
And that comment suggested it was relevant, that's why I said it wasn't.
Well I reckon £10,800 will be the offer. I expect she'll accept it as my girlfriend already told her half was unreasonable, and now I have some figures to explain it all.
I'll be back in 6 months with a progress report!
Maths, especially in winter, is not my forte. But I'd go with...
£145k house now worth £125k, 86.2%
86.2% of half of dad's £40k deposit contribution is ~£17241.
Total up all house maintenance costs regarding house structure and plot over the ten years (exclude things like white goods, they are now GF's unless their initial outlay was split at time of buying home), plus fees for selling home, divide this figure by two. Call this "upkeep costs share."
Sister receives £17241-"upkeep costs share"
Families, who would have 'em? Run away! 😆
Whose names are on the mortgage and deeds? When i bought 2 and a bit years ago we [b]had[/b] too state the equity split on the original paperwork, but I digress...
Remember a house you live in is not an investment, any money it "makes" is a bonus.
The fair way is as several above sale value/purchase value x initial investment + 10:1 split of remaining equity (17k/19k split iirc)
If you'd rather think of it as an investment assume the building was owned and rented separately... Take the total individual investment and split the equity according to value of investment. Work out the rental value of the house (for sis it [b]is[/b] an investment and could have been rented had oh not been there) pay sis half of rental value which is what shed have received had it been rented.
So roughly:
10k each initial gift.[edit I've assumed loss from initial deposit, you can make it 20k if you like but it works out worse for your oh]
Assumed mortgage 450pcm @9.5 to 0.5
Oh put in 61.3k (83%)
Sis put in 12,700 (17%)
Total return on investment 36k
Oh gets 83% (29,9k) of 36k equity.
Sis gets 17% (6.1k) of 36k equity
Assumed rental 350pcm payable, 175 each for first year, 350 for oh for remaining 9.
So sis owes 2100 (leaving 4k of equity)
Oh owes 39,990 (all equity plus she needs to put in 10k cash)
Rental return to sis 21k
Rental return to oh 21k
So sis takes 25k (21k rental +4k equity after rent payment)
Oh takes 11k (21k rental - 10k equity after rental payment)
So really, I'd go for the 50/50 split and think the sister is being quite generous.
Give her half. Sounds like a price worth paying to get her out of your life.
[b]andyl[/b] wrote:
If it was considered a loan then either work out what £20k would have got you in the last 9 years or work out the interest saving on the mortgage overthat period for £125k rather than £105k.
Interesting argument - on that basis the sister is owed a tad more than £20k 😉
[b]BoardinBob[/b] wrote:
Well I reckon £10,800 will be the offer. I expect she’ll accept it as my girlfriend already told her half was unreasonable, and now I have some figures to explain it all.
I’ll be back in 6 months with a progress report!
You have lots of figures explaining the fair offer is a lot more than that! We all agree that half is unreasonable - she's only due about £750 less than that.
In reality of course, as explained above, it's not actually your gf's decision to make, because her living there makes no difference to the legal ownership of the house or the mortgage. So it will be the gf and her sister jointly selling the house, paying off the mortgage and splitting the proceeds. Your gf won't get the whole £36k to allocate as she sees fit. If she wants to get more than the £18k she's strictly legally entitled to then I suggest she doesn't go making final offers. But then given her job she should know this...
Though I am having a little chuckle that you came on here hoping we'd support you in your thoughts that £10k was far too much 😉
Though I am having a little chuckle that you came on here hoping we’d support you in your thoughts that £10k was far too much
I don't need any support. As I said, there's no skin in the game here for me. Any money is hers.
I definitely disagree with the position you and Gary M are taking though. This notion of rent has no bearing in my opinion.
50p says the sister accepts the £10k-ish offer 😉
Best of luck Bob, money and family, rarely easy.
I asked a friend who is Clever. This was his take:
My view
The father helped with the purchase with 40k - 20k for each daughter
assuming an interest rate of 5% (realistic for the time) each daughter will contribute approximately £3600 per year
Sister only contributes this for 1 year = total input is 3600
Girlfriend pays both for years 2 to 10 and half in year 1 = total input is 3600x19=£68400
total input per daughter = fathers contribution+each daughter contribution
sister : £20000 + £3600 = 23600
girlfriend : £20000 + 68400 = 88400
I would suggest the profit from the sale of the flat is apportioned based on contribution - 10k sounds about right and fair
Legally she is probably entitled to 50% so about £18k
sounds like a fight about £8k with family - in my view not worth it
I'm rubbish at maths so no idea on the split but wondering where in the U.K. property has gone down in value over 10 years?!
Glasgow. Still lower than it was at the peak of the 2007 madness. My place is still worth about 15% less than i paid in 2007. And we both stay in very popular locations
Your girlfriend has enjoyed the benefit for 10 years of having her sisters £20k lowering her mortgage payments and has had a nice place to live for this time.
It's not her sister's £20k, it's her dad's.
There’s another property out there in the sister and partner’s name, that the father gave them money towards.
I'm starting to think he has more money than sense. And that the sister is exploiting that.
Well I reckon £10,800 will be the offer. I expect she’ll accept it as my girlfriend already told her half was unreasonable, and now I have some figures to explain it all.
I'd be very careful in offering to show your working. "How does a free ten grand sound?" might be a better gambit than giving her something she can pick holes in. Pitch it as though you're doing a favour and being generous, "yeah, you're right, you should probably get something."
Something else has just struck me.
She's 50:50 on the deeds for this place despite moving out 9 years ago and not contributing a dime since.
She's now living with a partner who bought a house with an inheritance, still isn't paying a dime towards it, and is on the deeds 50:50.
There's a theme here. She effectively owns an entire property after paying a mortgage for six months. At this point I'm very much leaning towards offering the 10k as a fair offer and then countering with "sue us then, bitch" if she rejects it.
"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."
Kinda with him on this....
Sister jobbed of after a year leaving GF with 100% rather than 50% of mortgage repayments. Surely the idea that some have mooted that GF has had a "subsided" rent is not right. If anything she has had to fork out twice as much to cover the mortgage.
Dad's 40k has now essentially diminished in value. Sister could have said when moving out that she wants her share of the money and the GF would have had to pay her out her ~20k. The fact she hadn't done that and that "her investment" (thanks dad) is now worth less but something the GF should cover. The GF has suffered the same loss.
The GF has had to cover mortgage repayments and presumably ongoing costs of the property.
Sister hasn't really got a moral leg to stand on. However, the courts may see it differently....
Just to throw a couple of curve-balls into the equation:
Did your girlfriend kick her sister out or did she leave voluntarily?
Was there anything preventing sister from moving back in whenever she pleased?
Was your girlfriend prevented from taking a lodger/roomie to pay rent and subsidize mortgage/running costs?
I'm guessing none of these factors have any legal bearing but could be used as a moral justification should it suit her.
Assuming sister left voluntarily, your gf could have rented out a room to subsidize the mortgage the sister should have been paying but, of course, your gf didn't incase sister wanted to move back in.. 😉
Legally, I'd doubt who paid what and who has been living rent free or whatever actually matters. Both names are on the mortgage. I'd bet a court would split 50:50.
I struggle with long sentences but what property bought in 2007 for £145k is now worth £125K? Can we get some here in Cheltenham please?
<quote> Legally, I’d doubt who paid what and who has been living rent free or whatever actually matters. Both names are on the mortgage. I’d bet a court would split 50:50.</quote>
So gf should sue sister for 9 years worth of unpaid mortgage! 😉