Q My boyfriend is buying a house and I plan to make a cash contribution towards its purchase. The mortgage will be solely in his name as I already own another property (which I plan to keep and rent). The value of the property is £487,000 so I plan to contribute £48,700 plus £1,435 stamp duty in order to own a 10% share of the property. I will then be paying half of the mortgage with my partner every month. I queried whether this was fair as if we were to split I would only walk away with 10%. He will contributing £50,000, plus the remainder of the stamp duty and fees. He has two children and has been through a divorce and so is trying to protect himself as he has mentioned that I already own a home. It bothers me that this arrangement isn’t the fairest way to work this out. Any advice would be much appreciated.
CL
A I’m with you on the arrangement not being the fairest, because it isn’t. Paying 10% towards the purchase price and then paying half the mortgage each month should make you entitled to share of more than 10% (because part of the monthly mortgage repayment goes towards paying off the loan, therefore increasing your equity). However, I can also appreciate that going through divorce proceedings may have made your boyfriend a bit once-bitten-twice-shy about jointly-owned property, but if that is the case, perhaps he should avoid joint ownership altogether. And perhaps you should too if you doubt the fairness of it all – not least because such a lack of trust can’t be great for your relationship. This might also make sense from a financial point of view. Because you already own a property which you will not be selling, the stamp duty land tax (SDLT) due on the whole purchase price of the new property would be at the higher rate (ie standard rate plus 3%) so your 10% share of the total SDLT bill would be £2,896 rather than £1,435. The higher rate of SDLT will also apply if your boyfriend’s erstwhile family home has not been sold and he still has an interest in it. However, if any agreement about the family home with his ex-spouse has been recorded in a consent order approved by the court, he will be exempt from paying the higher rate of SDLT.
What really worries me is that if you are not going to be named on the mortgage, nor will you be named as a joint owner of the property at the Land Registry. It is a rare – if not non-existent – lender that is prepared to issue a mortgage in a sole name when there is more than one person named at the Land Registry. That’s because if there is one mortgage holder but two official owners, if the mortgage payer defaults, a lender can’t take possession of the property while the other owner is still living there and lenders don’t like the idea of not being able to get their money back. Before handing over any cash, you need to establish exactly what your cash contribution is buying. In addition, I suggest you get legal advice on what sort of written agreement you need to have drawn up to say how you will get your money back if you and your boyfriend split up and/or the property is sold.
Muddled about mortgages? Concerned about conveyancing? Email your homebuying and borrowing worries to Virginia Wallis at virginia.wallis.freelance@theguardian.com
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