# House Equity split formula

#### Jonesy19

##### Registered User
We have agreed to separate and for my wife to stay in the family home with kids for further 4 years at which point she will sell the property. Estimated current value of house in €370k with €234k owed on mortgage leaving equity of €136k.

if we sold now and split equity we would each have €68k. However my wife is not in a position to buy me out and kids to remain the the home for stability over the next 4 years.

We are both looking to move on and are looking for a simple formula that is fair and we can both agree on. My wife has calculations that would mean my equity would drop from 50% to 31% over 4 years based on her paying the mortgage herself on her own. I would rather have the 68k now of course and cannot understand how this amount would reduce over the 4 years to €31k.

As we have been paying the Mortgage for 12 years together and she proposes to pay solely for an additional 4 years I would suggest a ratio of 6:10 years equating to a 3:5 split of equity at time of sale. Is this an acceptable method for calculating the equity or is there a simpler way of solving what must be quite a common problem?

thanks

#### luckystar

##### Registered User
Have you calculated maintenance? Is this in lieu of maintenance?
Surely park the ‘equity’ at its current rate would be fairest and see what happens in 4 years. Are you sure the house will be sold in 4 years?

#### NoRegretsCoyote

##### Registered User
You would have to tell us:
1. How long is left on the mortgage
2. What is the rate
3. What is the monthly payment

#### Jonesy19

##### Registered User
Thanks for replies

The maintenance for children we have agreed an amount separate of the house ownership. We are both currently on the mortgage and jointly own the home. I am considering taking my name off the deeds and my wife to own property and continue paying the full mortgage with a signed agreement that the house will be sold in 4 years time and at that time I will get my share. Of course the 2 simpler options would be to either sell the house now or for my wife to buy me out but that’s not on the table so we are looking at option 3 which is a sort of deferred charge arrangement.

1.) the existing joint mortgage has 18 years to run
2.) Current interest rate is 3.15%
3.) monthly mortgage payment of €1299

#### Brendan Burgess

##### Founder
This is very difficult and there really is no standard formula.

Let me make two assumptions here
1) Your maintenance is fair and includes an amount to cover their accommodation costs.
2) You own the house equally

This is how I would approach it as an independent person - in other words, not taking your side or your wife's side.

There are a few options.

A) The simplest. She can buy you out now for €68k. She then owns the house and is responsible for the mortgage payments.
As she can't afford this, then it becomes a loan from you. And it is paid to you when the house is sold.
If she were to borrow this money, she would pay 3.15% interest. So she should pay you 3.15% interest on the loan.

The beauty of this approach is that if she gets the money earlier, she can clear it earlier. Or if it suits you and her and your children, to extend beyond 4 years, then you can do that. The price is agreed. And interest continues to accumulate.

#### Brendan Burgess

##### Founder
B) The shared accommodation costs approach

Let's say you can rent an equivalent place for €900 per month.

So you retain ownership of the house. You pay her €200 a month so that both of you have the same accommodation costs.

Now, if it costs you €1,500 a month to get an equivalent place, she pays you €100 a month.

When the house is sold, you get half the net proceeds.

This is messier, but probably a bit fairer.

It's much more expensive to rent property now than to rent the money to buy it. So you are sharing the costs equally.

It could be that after 4 years, she no longer wants the house and you do. Then you just reverse this. She rents and you pay the mortgage.

The advantage for you is that you retain a stake in the property market.

You are also contributing to the accommodation costs of your children.

Brendan

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#### NoRegretsCoyote

##### Registered User
I am considering taking my name off the deeds and my wife to own property and continue paying the full mortgage with a signed agreement that the house will be sold in 4 years time and at that time I will get my share.

It seems a bit elaborate. I think it (practically) gets difficult to force her to sell in four years if she doesn't want to, even if you have a contract to that effect.

Simpler if you both retain joint ownership and split mortgage equally. She then pays you rent of a few hundred euros a month to live in the house. In effect a credit against the maintenance you'll be paying. There are downsides to this, you'd still own property with someone you're not married to, but this could work for you both if you think you could remain on good terms.

Otherwise a win-win may be to reduce the mortgage rate. There is better on offer than 3.15%. Talk to your bank or look at switching.

#### Bronte

##### Registered User
Why would your wife leave the house in 4 years. And yes it's a common problem. Do not take your name off the deeds. In any case you can't as there is a joint mortgage on it andl the bank are unlikely to allow that. What if house prices collapse in 4 years time. Maybe your wife will buy out your equity via a reduced maintenance. That's if she can afford to.

#### Brendan Burgess

##### Founder

Not sure about the wisdom of that. I could see how this might well be portrayed in a later dispute as "He paid no maintenance for his children."

Brendan

#### Thirsty

##### Registered User
Simpler if you both retain joint ownership and split mortgage equally.
This: then when you come to sell the house you split the proceeds. Assuming this happens when your youngest child is 18 or 23 (full-time education).

She then pays you rent of a few hundred euros a month to live in the house.
This makes no sense, mortgage is being paid.

In effect a credit against the maintenance you'll be paying.
Child maintenance is the children's entitlement, until they are 18 or 23 if in full time education. It isn't 'offset'.

Definitely a good idea to look at getting a better mortgage rate now while you can. You needn't let on to banks that you are separating.

#### Brendan Burgess

##### Founder
Child maintenance is the children's entitlement, until they are 18 or 23 if in full time education. It isn't 'offset'.

It could be worth agreeing an offset if she has any concerns about him paying the maintenance?

#### NoRegretsCoyote

##### Registered User
This makes no sense, mortgage is being paid.

With this proposal the husband and wife both equally own house and equally pay the mortgage. If the husband doesn't live in the house anymore the wife pays him a small rent to occupy his part.

Child maintenance is the children's entitlement, until they are 18 or 23 if in full time education. It isn't 'offset'.
I never suggested otherwise.

It would basically be an accounting treatment. There is no point in husband paying the wife €500 maintenance and her paying him €200 rent. He should just pay her €300.

Not sure about the wisdom of that. I could see how this might well be portrayed in a later dispute as "He paid no maintenance for his children."

You could do this, but it would want to be carefully agreed in writing to make it clear.

#### Brendan Burgess

##### Founder
You could do this, but it would want to be carefully agreed in writing to make it clear.

On reflection, if she had any doubt that he would pay the maintenance, then this could be good for her.

Brendan

#### Thirsty

##### Registered User
If the husband doesn't live in the house anymore the wife pays him a small rent to occupy his par
It doesn't work that way. It's the children's home.

#### NoRegretsCoyote

##### Registered User
It doesn't work that way. It's the children's home.
It's a hypothetical scenario.

Of course it can work that way if they structure it that way.

#### Thirsty

##### Registered User
Any settlement agreement has to be "signed off" at a court hearing. Judges can, and have, sent back settlement terms.

If it's agreed to sell the property in X years time, the non-resident parent gets their share of the equity at that time. They don't get a secondary income via rental payments.

The property is the children's home, primary carer remains resident because it is the children's home. The primary carer is not 'renting' the property.