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Pricing Calculation

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I have a question which i'd like a few other people to look at - it's like this:

Person A and Person B buy a property 4 years ago with a house value of £147,500. Person A and Person B both put a deposit of £7000 each and take a mortgage of £133,500. They then rent out the house and the rent covers the mortgage. Four years later the value of the property is £170,000 and Person A wants to sell his share in the property - the remaining mortgage left is now only £122,000 - how much should Person B pay to buy the share belonging to Person A?

Thanks.

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I have a question which i'd like a few other people to look at - it's like this:

Person A and Person B buy a property 4 years ago with a house value of £147,500. Person A and Person B both put a deposit of £7000 each and take a mortgage of £133,500. They then rent out the house and the rent covers the mortgage. Four years later the value of the property is £170,000 and Person A wants to sell his share in the property - the remaining mortgage left is now only £122,000 - how much should Person B pay to buy the share belonging to Person A?

Thanks.

£85,000. That's an extremely easy one. The mortgage is irrelevant, except that person A will have to pay off his share of the mortgage and person B will presumably need to increase his mortgage.

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£85,000. That's an extremely easy one. The mortgage is irrelevant, except that person A will have to pay off his share of the mortgage and person B will presumably need to increase his mortgage.

In reality i'm not sure if it's that simple....Would it be fair to work it out as follows:

50% share of increase in value (£170,000 - £145,000) / 2 = £11250

50% share of initial deposit = £7000

50% share of capital repayments made (£133,500 - £122,000) / 2 = £5750

Total payable = £24,000

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In reality i'm not sure if it's that simple....Would it be fair to work it out as follows:

50% share of increase in value (£170,000 - £145,000) / 2 = £11250

50% share of initial deposit = £7000

50% share of capital repayments made (£133,500 - £122,000) / 2 = £5750

Total payable = £24,000

That doesn't work at all. Person A wouldn't even get enough to repay his half of the mortgage.

Try this:

Person A has a mortgage of £61,000.

Person B pays person A £85,000 -- he may have to increase his mortgage, but it doesn't matter where he gets the money from.

Person A repays the mortgage -- he has to, since he's selling the asset against which it is secured -- and keeps £24,000.

Your approach would only work if the house and the mortgage were held by a separate legal entity, such as a trust or a holding company, and person B was buying person A's half ownership of that entity and not of the house directly.

Edited by zorn

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Guest consa

£24000 and person wanting out will have to pay legal costs to transfer the mortgage, solicitors etc

hence they would recieve £24000 less costs as this is their decision.

If it was a mutual decision both parties should be liable for the costs equally.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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