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QUESTION: We would like to know how to calculate the split of the collateral in our property now it is being sold.

Original house price - £565,000

Mortgage £397,000

Initial investment :- £168,00 shares in property split as below.

£124,320 ( 74%) - Me

£43,680 (26%) – Partner

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When the property was valued at £835,000 the calculations were as below:-

House price valued at - £835,000

Mortgage value £397,000

New Equity £438,000

£324.120 (74%) – Me

£113,880 (26%) – Partner

Then my Partner paid an additional £100,000 off the joint mortgage.. At that time we did not recalculate our new % share in the house. Now we are selling the property, we now need to know how to split the proceeds.

We are selling the house for £1022,500. Since my Partner paid £100,000 as mentioned above, we have both paid off equal sums brining the mortgage value down to £130,000, now leaving £892,500 equity.

Please can you advise the fairest way to re-calculate our percentages and the sums we should receive on sale . We have been given two options – 1) My Partner should have increased his shares by buying my shares giving me the £100,000 or 2) Starting from scratch as if we were buy the house at £835,000 using his £100,000 as part of his deposit, or do you have a different calculation you feel is fairer?

Thank you.

ANSWER: Now since you owned £324,120 and your partner owned £113,880 at the start,

and then your partner paid an additional £100,000, the amount owned for each of you is

£324,120 for you £213,880.

To find the percentage for each of you, take your individual amounts over the sum. That is, the sum is £538,000. Your share would then be roughly 60% and your partners would be 40%. If the percentages are carried out, they are really 60.24535316% and 39.75464684%, but it makes it really easy to call the amounts 60% and 40%.

If you start quibbling about a 1/4 of a percent when they are so close to a 10% increment, to much fuss would come up. As is, they can be taken to be roughly 3/5 (60%) and 2/5 (40%).

So with the £892,000 equity, I would divide it as £530,000 to you and £350,000 for you partner.

That would leave £12,000 left over to have whatever between the two of you. In the USA, that seems like it would be equivalent to enough to afford a fairly decent vacation together.

---------- FOLLOW-UP ----------

QUESTION: Thank you for your prompt reply.

My next question is - if the % on the original equity of £438,000 was split 74% (me) 26% (partner), surely the new % split you have calculated of 60% (me) 40% (partner) when he added his £100,000, should only be on the difference between the £438 (original equity) and the current equity of £892,000 (£454,000). Otherwise surely I would lose out because I would lose 14% of our original equity (£438,000)?

Thank You

A mistake was made on one of my numbers in my earlier calculations (swapping a couple of digits in one of the numbers), and not only that, I forgot to account for some of the details of your question. On that, ignore what I sent so far and let me start again.

The original price was £565,000. There was £168,000 that was paid on the original,

leaving £397,000 in mortgage. Of the £168,000 invested, £124,320 was by you and

£43,680 was by your partner.

When value of the house was £835,000, and the mortgage value was still £397,000.

The value we owned was then £835,000 - £397,000 = £438,000.

Equal payments were made on the £397,000 to bring it down to £130,000.

That means there was a total payment of £267,000. This was said to be done equally,

so you each payed £133,500.

This means you payed in £124,320 + £133,500 = £257,820 and

your partner paid in £43,800 + £100,000 + £133,500 = £277,300.

Added together, that gives a total of £525,120 that was paid in.

The house was sold at £1,022,500. After taking care of the rest of the mortgage,

that leaves £892,500. According to the total invested by each of you, that makes

your value at £438,193.84 and your partner's value at £454,306.16.

So after studying it in more detail, it looks like the total investment by your partner was a little above yours. In this way you both receive a roughly 70% payoff on your investment. Note that I don't take into account the fact that your initial payment was far greater, only in how much your total investments turned out to be. To look at what you possible might have owned at the start ignores the fact that he put in an extra £100,000 and you both invested another £133,500.

From what I read, that is what it looks like to me.

Please review what I sent any find anywhere that I put down some wrong numbers and point out why.

Thank you and best wishes.

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