What to do with house that is fair to both parties

A friend I know bought a home with her fiancee 6 months ago.
She put down a deposit of £25,000
She has three kids from a previous relationship (he has none)

They have not been getting on well so decided to break up.

She cannot afford to take on mortgage in her own name and if they sell there will be early redemption fees, plus payments to estate agents (so she would end up chipping into her deposit making it less likely to be able to buy somewhere else).


Her ex fiancee is happy to move out on the condition that she takes on mortgage payments (which she can afford to do)..

He then wants her to buy her out in 3 years (when no redemption penalties occur) which she should do as she believes she will be earning more then.

The question they have is what should she buy him out at?

They agree what house is worth now (£125,000)
They agree the deposit (£25,000) is hers.

The two options appear to be:

1) The increase in equity over next three years and split 50/50
ie if house goes up by £25,000. They both get £12,500. (by selling house or mortgage in her name to be able to pay him his money)
or
2) The increase in equity MINUS what she has paid towards reducing the equity via mortgage and split 50/50

So if house goes up by £25,000 and her mortgage payments have accounted for £5000 of that increase. The money to be split is is £20,000. ie she needs £10,000 to buy him out.

Or is there a 3rd option no one realises?

It is common to give credit for the capital reduced on the mortgage so option 2 is the most sensible course of action.

I assume that there was a declaration of trust specifying that your friend was to have the first £25k before the remainder was split? If not, that could be a problem so get an agreement in place ASAP.

Charles

No she went in naively and there is nothing which mentions the £25,000 deposit.

I am attempting to get them to agree to something that is fare to both sides and avoids anything court related to reduce costs.

her ex fiancee currently agrees she stumped up all the deposit and paid all legal fees so he currently says its only right she gets that back.

I think they are nearly there with regards to making this as painless as possible

Thank you for your quick response