INDU2XV Posted November 26, 2005 Share Posted November 26, 2005 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. Quote Link to comment Share on other sites More sharing options...
zorn Posted November 26, 2005 Share Posted November 26, 2005 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. Quote Link to comment Share on other sites More sharing options...
INDU2XV Posted November 26, 2005 Author Share Posted November 26, 2005 £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 Quote Link to comment Share on other sites More sharing options...
zorn Posted November 26, 2005 Share Posted November 26, 2005 (edited) 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 November 26, 2005 by zorn Quote Link to comment Share on other sites More sharing options...
Guest consa Posted November 26, 2005 Share Posted November 26, 2005 £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. Quote Link to comment Share on other sites More sharing options...
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