How is share of ownership calculated on a joint mortgage with unequal sums for the initial deposit?

Posted on 9 February 2008

My friend and I would like to take out a joint mortgage but we have unequal sums for the initial deposit. Is there a common formula used for working out the proportion of profit each is entitled to on sale of the property based on the amount each puts in as deposit? Also, if one party pays in a lump sum for development costs or off the mortgage after purchase how is the share of ownership calculated thereafter? Our sums are likely to be a £25,000 deposit split £10,000/£15,000 on a property of maximum value £225,000. Thanks for your help!

Leanne

Hi Leanne,

No there is not a standard formula, however you can calculate your shares using the following:

Assuming equal mortgage contributions and equal home improvement spending
Sale price - Mortgage = Equity.

Initial equity ratio was 10:15  so divide the new equity by 25, then times by 10 for the first person and times by 15 for the second.

If one person must spend a lump sum on the property, I would calculate at the time what percentage of the value of the property it constitutes prior to improvement, then subtract that percentage from the value of the property, before you carry out the calculation as above. This is the easiest way to exclude it from the property value which is to be shared. (This only works if the improvement increases the value of the property by more money than the improvement cost.)

Personally, I would have a solicitor calculate it for you, although there are no laws or formal rules for property splits but he/she will be able to suggest the fairest route.

Category: Special circumstances

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