Q My boyfriend and I would like to buy our first property together. We will be joint owners and both contribute towards the deposit, the repayment mortgage and upkeep of a £740,000 house. He is on a significantly higher salary than I am (it’s more than double mine, and likely to increase in the next couple of months). He has therefore been able to save much more than I have so I am only going to be able to contribute about £20,000 while he – with help from his parents – will have £100,000 to put towards the deposit and the stamp duty. I don’t need or particularly want to live in a £740,000 house but I don’t have a lot of choice as he is being very inflexible in terms of location.
He has suggested we create some sort of legal document before buying a property, declaring that in the event we sell the house, he would get back the percentage that he put in. He has also suggested that I pay a higher percentage of the mortgage repayments, as he will be putting in more of the deposit.
While I understand that he would like to protect his assets in the case of us breaking up in the future (we are not engaged or married), I would like to understand what this means for me. If we were to break up and sell the house, what would this mean in terms of my ownership/stake in the house post-sell? Would this affidavit simply mean that I would need to pay him back 20% of the total value of the house, as this is the deposit I put in? How would my higher monthly mortgage repayments affect this split, if at all? How do interest payments affect this? Is there another way you would recommend to keep things fair and simple?
My boyfriend’s job means he is much savvier about getting the best out of a financial situation – I would really appreciate any advice as I feel quite out of my depth here.
A My kneejerk reaction to your question was: don’t do it! My more measured reaction is to tell you that you do have a choice and you don’t have to enter into the joint purchase of a house which you don’t want to buy, which is in a location you don’t like and which, I suspect, will challenge you financially.
Judging by the responses from readers to other letters I have answered about joint purchases where one partner was calling all the shots, if you do go ahead in spite of your reservations, it is unlikely to end well.
Your boyfriend is right to say that you should have a legal agreement – usually referred to as a deed of trust – drawn up setting out how you own the property, your shares in it and what will happen in the event of a split. It shouldn’t just say what percentage your boyfriend would get back in the event of a sale but also how much you would get back.
Your boyfriend is wrong, however, to say that you should pay a higher percentage of the mortgage repayments. The fact that he put more of the deposit is reflected in your percentage shares in the property with his being bigger because he contributed more than you. Your contribution of £20,000 plus half the £620,000 mortgage gives you a share of just under 45% while his contribution of £100,000 plus half the mortgage gets him a 55% share (which may surprise him).
What may also surprise him is that in insisting on buying such an expensive place, he is missing out on concessionary rates of stamp duty land tax (SDLT) for first-time buyers. If you could convince him to stick to a budget of £500,000 or less there would be no SDLT on the first £300,000 of the purchase price and 5% on the remaining £200,000. You would also have a much more manageable mortgage which I suspect would suit you better.
Finally, unless you can get your boyfriend to take your views into account – and select a property, price and location you are both happy with – I still think that you will regret going ahead with the joint purchase.