Mortgage and equity advice for me and hubby who are splitting

lisa76

Last week hubby and i decided to have a separation, so he moved in with his cousin. He came back last night saying that the marriage was def over and he was moving back in until he finds somewhere else to live.

We have a 4 bed det house worth 225k with a mortgage of 60k. My solicitor said that the courts wouldn't make me sell the house, and he would be entitled to 40% equity, but because i wouldn't be able to afford an extra mortgatge to pay him off, i wouldn't have to give him this until our daughter is out of full time education.

Hubby earns 32k a year so he should be able to get a mortgage for around 90k, but obviously this is not a lot these days to get a decent 3 bed house (he has another boy from a previous relationship)

The question i want to ask is can he use the equity in our house to get a mortgage, as obviously he is going to get 60K or much more when i sell this or daughter has finished school.

This would be a good thing, as it means he won't make me sell, and i really don't want to leave my home.

Any advice would be gratefully received, as my head is spinning at the moment, and i need to start thinking about mine and my daughters future - god knows it's going to be hard, and i don't want the worry about having to sell as well.

Thanks xx

Bossyboots

I'm a bit surprised at your solicitor's advice. You and one daughter do not need a four bedroom house and our local court would expect the property to be sold for you to downsize and achieve a clean break now. I would be shocked if your husband's solicitor did not give him that advice, but perhaps things are looked at differently where you live. There should then be sufficient for you both to buy another property with a small mortgage each.

Alternatively, if you cannot raise sufficient mortgage on a new property then he can have his charge over your new property and raise a larger mortgage for himself. I would expect him to argue that he should have 50% of the property as his housing needs are identical, if not greater than yours (he will need to make provision for staying contact with a boy and a girl so could argue he would need three bedrooms whereas on the face of it you only need two).

Sorry if this makes your head spin more. It may well be that you can sort it all out in the way you wish and it remains amicable but that doesn't happen very often and clearly, if he cant raise sufficient mortgage to buy a decent sized property himself there is going to be a conflict arising.

I should also point out that while it is usual for the parent with whom the child is staying to retain the property with the other parent having a charge over the property, that is usually where circumstances mean that moving is simply not a possibility, usually because the earning potential of the spouse staying in the home is insufficient to raise a mortgage at the time. In your case, you could downsize so that argument is considerably weakened in your case.

joepubli

Need more info to provide a sensible comment.
1. Do you have any earnings.
2. Do either of you have any savings or other assets or debts. Rough value.
3. How old is the marriage.
4. How old your daughter and his son.
5. Is the mortgage joint

lisa76

hi joepubli
1. my earnings are 13568 per annum his are 32000
2. we don't have any savings or debts worth talking about
3. we've been married 3.5 years
4. our daughter is 1 and his son is 9 (who lives with the mother and hubby pays through csa for him)
5. mortgage is joint

i have rung a few mortgage providers this morning who would not take the equity in this house into consideration, but i found another post on here where the hubby did manage to do this , so it must be possible.

i guess i might have to remortgage so that i can give him half of the money (there is no way i can afford to give him 60), but i'm gonna have to sit down and seriously see how i can afford to live!

lisa76

bossyboots, thanks for your reply, you are only saying what i guess i know, its just i cannot face leaving our house when i've put my heart and soul into it - but hey sh*t happens!!
can i ask what 'a charge' is, you mention that in your post?

Bossyboots

lisa76 wrote:

bossyboots, thanks for your reply, you are only saying what i guess i know, its just i cannot face leaving our house when i've put my heart and soul into it - but hey sh*t happens!!
can i ask what 'a charge' is, you mention that in your post?

A charge is a document which states that x amount is owed (either in money or percentage or whatever) to the person holding the charge and it is registered with the land registry. It is just like a mortgage deed in essence. The property cannot be sold without it being paid off at sale or before. It takes second place to any mortgage and part of your mortgage agreement will include a clause that the mortgage is always the first charge on a property.

lisa76

so do any mortgage lenders recognise this charge then? because we rang northern rock and nationwide this morning (just 2 at random) and neither would take the equity into consideration - and wouldn't this charge be considered equivelent to a deposit????

Bossyboots

lisa76 wrote:

so do any mortgage lenders recognise this charge then? because we rang northern rock and nationwide this morning (just 2 at random) and neither would take the equity into consideration - and wouldn't this charge be considered equivelent to a deposit????

The charge is only realisable on sale in your circumstances or if you pay him off earlier. It protects your husband from you selling the property without paying him his money as in the normal course of events, the house would be put into your sole name. The other way a charge is used is if you lend someone money you can put a charge on their property to ensure you have collateral to recover the loan.

What your husband is actually doing in putting a charge on the property for his share is loaning you that share until your daughter leaves school or you cohabit or remarry. Otherwise, if he asked for his cash from the house, you would have to pay him off or sell the property.

Property values can go up as well as down. His share in the property when you come to settle up may not be enough to cover what he needs. He would need to find a mortgage company prepared to take that risk.

Whatever you do, do not let him take a loan with a third charge secured on your property. What you want at the end of this (assuming you are able to stay put) is your mortgage plus his charge (called a second charge as it is number two in the order of charges) for future payoff. If you have a third charge as collateral for his loan and he defaults you could still lose the house.

I hope that makes sense. I have rewritten it twice as I know what I am trying to say but having difficulty articulating it in terms others will understand rather than being too technical.

lisa76

right i kind of get what you are saying.

i think it's down my building soc tomorrow am to see if i can afford to give him any kind of pay off, and then he'll have to put his facts and figures together to sort out his mortgage.

god this is a nightmare, we should have stayed put in my little 2 bed house and then everything would have been ok, or had an agreement drawn up when we bought this one, as i put in 3 times as much as him as deposit - ahhh hindsight, it's a great thing!!!

Bossyboots

lisa76 wrote:

right i kind of get what you are saying.

i think it's down my building soc tomorrow am to see if i can afford to give him any kind of pay off, and then he'll have to put his facts and figures together to sort out his mortgage.

god this is a nightmare, we should have stayed put in my little 2 bed house and then everything would have been ok, or had an agreement drawn up when we bought this one, as i put in 3 times as much as him as deposit - ahhh hindsight, it's a great thing!!!

Okay, that is crucial and is possibly why your solicitor has indicated he is only entitled to 40%. Because of the comparatively short length of your marriage, who put what into the property can be offset again the other's share. You start off on a "presumption of equality" which means you are both entitled to a 50% share. You can then balance the scales either way taking into account, as in this case, a considerably higher initial contribution and anything else that would make it unfair to either party to make it a straight half and half split. There is an immense amount of figurework for you both to do on this.

Beware of getting into a court battle over the finances if you can avoid it. You could find that what extra you gain by fighting for extra is simply swallowed up in legal fees.

ss1973

Hi lisa76,

I'm in the same position as you at the moment.

Advice I've been given is slightly different. My solicitor said that the courts are now "fair" to both parties. This means that I cannot keep my 210k house but have to sell up and split the profit 60/40 as I also have a daughter to consider and therefore can expect a higher %.

I'm not sure if this would be taken into account in your case - but my solicitor also said that I need to take into account my other halfs pension(s). These can be split 50/50 but I'm not that bad am only asking for a 30% clean break payment from him out of the profit he'll make from the house. By this point I'll have cleaned him out so I'm not asking for 50%!

I hope you manage to sort everything out and if anyone out there has any advice for me and the information I've been given from the solicitor please let me know.