Co-Ownership Equity Share Calculator NZ

Updated  Ownership shares are whatever co-owners agree and record on the title. There is no default the law imposes.
Quick answer Two buyers putting in $150,000.00 and $50,000.00 on a $900,000.00 house, sharing the loan equally, hold 55.56% and 44.44%. On a later sale the first owner receives $246,666.67 if deposits are returned before the gain is split, but $211,111.11 if everything is divided by share. Choosing the method is worth $35,555.56 to them.

Buying with someone else is mostly an exercise in writing down what everyone already assumes, because the assumptions are rarely the same. Two unequal deposits raise three separate questions that get treated as one: what percentage each person owns, who pays what towards the mortgage, and how the money is divided when the house is eventually sold. They can be answered differently from each other, and the last one is where the real money sits. Returning each deposit before splitting the growth, or splitting everything by ownership share, are both defensible and both common, and on ordinary New Zealand numbers they differ by tens of thousands of dollars. Nobody notices until the property sells, which is exactly the wrong time to find out that the other person understood it differently.

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The purchase
The eventual sale
Ownership shares
55.56% / 44.44%
A and B, as tenants in common
Equity to divide at sale
$380,000.00
after costs and repaying the loan
What the method is worth
$35,555.56
the gap for Owner A between the two methods

Ownership shares at purchase

Owner AOwner BTotal
Deposit$150,000.00$50,000.00$200,000.00
Share of the loan$350,000.00$350,000.00$700,000.00
Total stake$500,000.00$400,000.00$900,000.00
Ownership share55.56%44.44%100.00%

Owner A puts in a larger deposit but shares the loan equally, so their stake is larger than Owner B's and the shares are unequal. Recording anything else on the title moves value between them.

What is left to divide

Sale price$1,050,000.00
Less selling costs$30,000.00
Less loan repaid$640,000.00
Equity to divide$380,000.00
Of which, original deposits$200,000.00
Of which, principal repaid over time$60,000.00
Of which, capital growth net of costs$120,000.00

The two methods compared

MethodOwner AOwner B
Deposits returned first
each deposit back, principal repaid back, then the growth split by share		$246,666.67$133,333.33
Everything by share
the whole equity divided by the ownership percentages		$211,111.11$168,888.89
Difference$35,555.56-$35,555.56

Returning deposits first favours Owner A by $35,555.56. It is not more correct, it is a different agreement, and it needs to be written down before settlement.

This is an indicative split and not legal advice on how to own property together. How co-owners hold a property, and how proceeds are divided, is whatever they agree and record, so the figures here illustrate two common approaches rather than any rule. Get a property sharing agreement drawn up by a lawyer before settlement. Note that a joint mortgage usually makes each borrower liable for the whole debt rather than their own share, regardless of what the title or any agreement between you says. This page ignores tax, which can apply to a sale under the bright-line test and other rules, and it ignores unequal contributions to the mortgage or to improvements after purchase, both of which often become the real argument.

Three questions that are not the same question

Co-ownership gets discussed as though the ownership share, the mortgage contribution and the sale proceeds all follow from one decision. They do not. The share on the title is a property law question, the mortgage contribution is a cashflow arrangement between the owners, and the division of proceeds is whatever the property sharing agreement says. It is entirely possible to own fifty per cent, pay sixty per cent of the mortgage and receive forty per cent of the proceeds, and none of those is inconsistent with the others. Problems come from assuming that fixing one of them fixes the other two.

Why the shares are not simply the deposit ratio

On the default figures one deposit is three times the other, and yet the ownership shares are much closer together than three to one. That is because the loan is a contribution too. When two people share a mortgage equally, they are contributing equally to the largest part of the purchase, and the deposit difference is diluted against it. Change the loan split to follow the deposits instead and the shares move to match the deposits exactly. Neither is right in the abstract. What matters is that the share recorded on the title follows from a stated view about who is contributing what.

The method of division is where the money is

Returning each deposit before splitting the growth treats the deposits as capital lent to the arrangement and to be repaid before anyone shares in the upside. Splitting everything by ownership share treats the deposits as having already bought a percentage, so the person who put in more owns more and that is the end of it. Both are used and both are defensible. On the default figures they differ by more than thirty-five thousand dollars for the same person on the same sale. That gap is the reason a property sharing agreement is not paperwork.

Worked example

Two people buy at $900,000.00. Owner A puts in $150,000.00 and Owner B $50,000.00, so the loan is $700,000.00 and they share it equally at $350,000.00 each. Owner A's total stake is $500,000.00 and Owner B's is $400,000.00, giving shares of 55.56% and 44.44%.

The property later sells for $1,050,000.00. After $30,000.00 of selling costs and repaying the $640,000.00 still owed, $380,000.00 is left. That is the original $200,000.00 of deposits, the $60,000.00 of principal repaid along the way, and $120,000.00 of growth net of costs.

Returning deposits and principal first and splitting only the growth gives Owner A $246,666.67 and Owner B $133,333.33. Dividing the whole $380,000.00 by ownership share instead gives Owner A $211,111.11 and Owner B $168,888.89. The choice of method is worth $35,555.56.

How this is calculated

The loan is the purchase price less both deposits, and it is divided either equally or in proportion to the deposits, as selected. Each owner's stake is their deposit plus their share of the loan, and their ownership share is that stake as a percentage of the purchase price. At sale, the equity available is the sale price less selling costs less the loan balance outstanding. Principal repaid is the original loan less that balance, and is credited to each owner in the same proportion as they took on the loan. Under the first method each owner receives their deposit back, plus their share of the principal repaid, plus their ownership share of whatever remains. Under the second the whole equity is multiplied by the ownership share. Both methods distribute the same total, so the difference for one owner is always the mirror image of the difference for the other.

Official sources

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Frequently asked questions

What is the difference between joint tenants and tenants in common?

Joint tenants own the whole property together in undivided shares, and if one dies their interest passes automatically to the survivor regardless of any will. Tenants in common own defined shares which can be unequal, and each share passes under that person's will. Unequal deposits almost always point to tenants in common, because it is the only structure that can record the difference on the title.

Do ownership shares have to match the deposits?

No. The shares can be whatever the co-owners agree, and they are recorded on the title. What matters is that the shares reflect a decision rather than an accident. If the deposits are unequal but the loan is shared equally, then equal shares would quietly transfer value from the larger depositor to the smaller one, which is fine if both understand it and a problem if they do not.

Should deposits be returned before the gain is split?

There is no rule, and both methods are used. Returning each deposit first and then splitting only the growth treats the deposits as loans to the arrangement, which usually suits the person who put in more. Splitting everything by ownership share treats the deposits as having bought a share outright, which usually suits the person who put in less. Whichever is chosen, write it into a property sharing agreement before settlement rather than arguing about it at sale.

What is a property sharing agreement?

It is a written agreement between co-owners covering the things the title cannot record: how the mortgage and outgoings are shared, what happens if one person wants out, how the property is valued in that case, who has first right to buy the other out, and how proceeds are divided on sale. It has no standard form and is prepared by a lawyer. Buying together without one is the single most common cause of co-ownership disputes.

Are both co-owners liable for the whole mortgage?

Usually yes. A joint mortgage normally makes each borrower liable for the entire debt rather than for their own share of it, so if one person stops paying the lender can pursue the other for all of it. That liability is separate from the ownership shares on the title and is not changed by any agreement between the co-owners, which is a point worth being clear about before signing.