What's the best and most fair way to split profit (from overpayments) on a jointly owned property?

Question

My partner & I (first time buyers) have just applied for a joint mortgage. We don't foresee a break-up but are looking at every possible contingency before embarking on this important purchase! He earns twice as much as me and will, therefore, be paying twice as much of the monthly mortgage payments. We will have a Tenancy in Common Agreement drawn up with the relevant unequal split shares (40/60) reflecting the balance of minimum payments we each must make monthly. Our query actually relates to overpayments; if we do break up in a few years' time, and we've both made varying overpayments during that time, how should the profit from the sale of the property be split? Should we each keep a running total of our overpayments and distribute those same amounts accordingly from the profits, with the remainder 40/60? Is there a more straightforward way of doing this - are we just making things more confusing doing it this way?! We each want the other to be happy with the final arrangement.

Answer 1

In the event that you break up it's highly unlikely that any overpayments you make will make a difference in the actual equity you have made purely from the raise in the market. It would be easier if you split the profit 60/40. As interest calcualted is usually more than your monthly repayments, any overpayment will simply be reducing the interest you pay and not be an actual 'extra' amount you are entitled to (unless you use it as an offsett account while you have the debt). So really by making additional repayments you are just paying off your home faster and entitling yourself to a larger profit should you sell.

Answer 2

The easiest thing is to add up the total each of you has put into the property (regular payments plus over-payments) to cover the mortgage, operating expenses, taxes, and any repairs. Then divide each of those numbers by the total paid in to get a percentage for each of you. If there is a need at some point to split profits from a sale or to recover over-payments those percentages are a perfectly reasonable way to do the divide-up.

Answer 3

the best solution is 50/50. However, since he is paying more
you could use the 60/40 split.

Answer 4

Stick to your 40/60.Good Luck

Answer 5

well if you decide to buy together there must be some commitment and you are setting up home together stop worrying whose paying what % more than the other and enjoy yourselves lives to short if you split you split and that's the price you pay for living together