Mortgage predicament due to pending divorce

eatsleaves

A friend (A) is currently going through a divorce, and it looks likely that the house (A is the sole owner) will have to be sold to pay off the divorcing ex-partner (B). A would like to somehow keep the mortgage, as the interest rate is only 1.5% above BOE base rate for the term of the mortgage.
The mutually agreed amount that B will receive is 50% of the equity. A cannot remortgage, or realistically get a new mortgage due to age and a below average credit score, in light of much stricter lending criteria.

Taking the details below :

1. The mortgage was a self certification one (discontinued now)
2. The current mortgage allows a maximum loan to value (LTV) of 75%
3. House is valued at £200,000
4. Outstanding mortgage balance is £150,000, meaning £25,000 ( the agreed 50% of equity) would be payable to B, leaving £25,000 left for A

A has viewed a property for £100,000, and as A has the £25,000, would still be within the 75% LTV condition.

Does anybody have any experience with such a scenario, or thoughts on how to settle up B financially without A losing the mortgage? Thanks in advance.

amnblog

A cannot move the mortgage or keep it where it is unless A can satisfy the lender they are a good risk moving forward.

eatsleaves

Thanks.

I forgot to mention that the mortgage is interest only, and as the reduced mortgage amount needed would be for £75,000, at 1.5% above 0.5% BOE base rate, am I correct in saying that the monthly repayments would be £125? If so, A could easily prove that that amount is affordable, and as the mortgage is flexible would look to make over-payments to reduce the mortgage.
Do you think lenders are generally as strict for this type of scenario as apposed to a new mortgage application?

TrickyDicky101

A will need to satisfy the lender's current lending requirements as to affordability including income and age.

Thrugelmir

eatsleaves wrote: »

If so, A could easily prove that that amount is affordable, ?

What's the lenders current policy towards interest only. That's the point at issue, not whether the mortgage is affordable.

Likewise porting will be at the discretion of the lender. Unless the mortgage product explicitly grants this option to the borrower.

amnblog

Yes, they are as strict. Either way it is a new mortgage application.

Mortgage to A+B on property C stops

and

Mortgage to A on property C starts

or

Mortgage to A+B on property C stops

and

Mortgage to A on property D starts

eatsleaves

Thanks again amnblog - just to clarify the facts, taking C as the current mortgaged house (marital home), and D as the £100,000 new property:

1. A is the sole legal owner of C, as confirmed on the Land Registry title.
2. A is the sole person on the mortgage of C, and has been from day one - the mortgage is more than 7 years old with no missed payments.

A has agreed to pay B 50% of equity in C, although no direct financial contribution to the mortgage or deposit has/was made by B.

I guess it's a separate discussion on whether A should or needs to pay 50% of the equity to B given the facts, but that is what both have agreed.

Given these facts, would it still a classed as a new mortgage application?

Thrugelmir

eatsleaves wrote: »

Given these facts, would it still a classed as a new mortgage application?

Moving house in every eventuality constitutes a new application.
Porting merely refers to specific terms of the mortgage i.e. the interest rate. A new application will be subject to the underwriting criteria at the time of application.

eatsleaves

Thanks Thrugelmir - I've just checked the lenders website, and it states:

"A Flexible loan is fully portable to a new home purchase, but the drawdown facility will need to be re-assessed on each application."

As you say that any change of address of the mortgaged property constitutes a new application, I guess it's not going to be possible to settle the divorce without selling the marital home and losing the mortgage.

wannahouse

eatsleaves wrote: »

I guess it's not going to be possible to settle the divorce without selling the marital home and losing the mortgage.

why can't they agree to pay off the £25,000 equity to the other party over an agree period of time, so they don't lose their home? (or take out a loan for that amount to do so?)

eatsleaves

wannahouse wrote: »

why can't they agree to pay off the £25,000 equity to the other party over an agree period of time, so they don't lose their home? (or take out a loan for that amount to do so?)

Thanks - B will not accept monthly payments as settlement as a lump sum is needed for a deposit on a property. A loan isn't an option due to the below average credit rating of A.