Divorce and Mortgage Liability: Fair?

cakeforbrains

My friend recently got divorced and it got me thinking about whether things are fair.

As is the case in many divorce situations my friend wanted to stay in the family home with the children and her ex was looking to secure a percentage of the equity upon the eventual sale of the house. The judge awarded a 55%/45% split (in her favour), but afterwards she admited to me that she hadn't really realised that this split would be based on the available equity when the house actually sells rather than a valuation made now.

This means that she has to continue to pay the full mortgage for potentially the next 15 years (their youngest child is 3) and that the 55/45 split will be made then. So, effectively, for every £1 she pays off the capital of the mortgage her ex will get 45p. It's like she's paying into a savings vehicle for him.

I know that this is a common situation. In fact, when I divorced eight years ago the judge made a similar ruling but I chose to sell up and move on straight away. My question is, do you think this is fair to all parties?

I'm not saying that it's not fair or looking for an argument at all. It's more that I need the justice of it explaining to me in a simple way!

So, for clarity's sake the scenario is:

A couple have a joint mortgage on a family home.
The couple divorce three years into that mortgage.
Partner A (let's just say the woman) stays in the home with the children. Partner B (the man) moves out and just pays standard maintenance for the children.
The judge rules that the woman can stay in the house until the youngest child is 18 (15 years time) and then the equity is split 55/45.
Over that 15 years the woman pays off the remainder of the mortgage. The man does not pay anything further to the mortgage.
After that 15 years they split the proceeds of the house sale 55/45.

Fair?

peachyprice

What you haven't factored in is that despite owning their own home the partner who is not living at the house is having to pay rent, probably much more than the mortgage, and will be unable to get their own mortgage for the next 15 years.

thrifties

I believe unfair, would be simpler based on valuation now before he stops mtge contributions. May be better to sell up and move on,

haras_nosirrah

I think it is only fair he shares in the increasing equity - for the next 15 years he won't be able to buy his own property and he is at the mercy of the mum paying the mortgage or his own credit record will be ruined if she doesn't. Maybe it would be fairer to take the mortgage out of the equation

e.g. now worth 100k with a 50k mortgage - therefore equity is 50k and ex's share is - £22,500

in 15 years same house is worth 200k and mortgage is down to 10k - maybe the equity should be 200k - 50k (mortgage friend has paid off) - £150k so ex share = £67500

Brighton_belle

northerntwo1 wrote: »

She could buy him out now which is what I would do.

There's every chance she wouldn't be able to get a mortgage in just her name for a family house.

theoretica

If the father is also paying child support this would include keeping a roof over the children's head, so he would be contributing to the mortgage, just less directly.

PeacefulWaters

He's still liable for 100% of the mortgage debt and mortgage payment if you can't / won't pay unless both he and the lender agree to transfer the mortgage into your name.

It will inhibit his own ability to get a mortgage elsewhere, thus significantly restricting his lifestyle choices.

whateva

If there is a long time to run on the mortgage, there is unlikely to be much equity in the property.

The mortgage company aren't going to get concerned about whether one or two people are paying the mortgage as long as it is being paid. So the best option in that case is to buy out the other partner. However if the mortgage has run for a considerable time, then the other partner has a bigger stake in the property and is entitled to their share of it. On an older mortgage the payments are likely to be a lot less than the rent the person moving out has to pay.

I might add that when a property is valued for the purposes of a divorce settlement there is no speculation on the part of the valuer. It is valued on the basis that you want to sell it that day, not when the right buyer comes along.

In my own case I was divorced in 1993 and our property was valued at 6,000 less than we paid for it in 1987. There was a big property crash at that time but it was still considerably less than if it was marketed for sale. So if you ever wonder what Estate Agents do to earn their commision, it's down to their ability to get the price they told you they could sell your house for.

FBaby

This is not what my solicitor advise me when I sought advice after separating from my ex. Saying that, we were not married and that was our only thing we own in common. It was very clear that the agreement was going to be that he was entited to a share of his equity (50%) at the time of the separation, whilst I continued to pay the mortgage alone and would be entitled to 100% of the equity gained after wards (or responsible for a negative equity if it came to this). We go the house valued and agreed the equity gained at this stage and included the cost of selling into it.

In the end, it didn't come to it, but according to my solicitor, that was common practice in such situation. Just one thing, the agreement was sale of the house by the time my youngest turned 18 OR sharing my life with someone else (ie. someone moving in, then the equity would have needed to be paid at this stage).

I personally think that was absolutely fair. The only thing I can think in your friend's situation is that she got to keep over assets, or he has to pay a higher maintenance, or childcare costs that will balance out her paying the full mortgage.

flowerpower74

Im in same situation. My ex left 10 years ago whilst i was pregnant and unable to get a job (long story) hes entitled to 25% of equity (as per divorce) At time only £10,000 collateral now theres £115 collateral in house. Does this take into account mortgage payment and the money iv spent on upkeep. (he didnt have problems getting another property he moved in with the woman he was having affair with). I heard that mortgage payments were taken into account now.

FBaby

Re-read the initial post again. Surely it very much depends on who was paying the mortgage when together and for how long. Say the ex lived in the house for 10 years and paid the full amount during that time, then partner moves in, and as she becomes a mum, he continues to pay for 5 years. He moves out, she stays with the kids and pays the rest of the mortgage for 10 years. Isn't fair that it should be a 50/50 at this stage?

Yes, he benefited from the increase in equity, but then by not being able to release equity earlier, it restricted him from investiging elsewhere where he could also have gained equity.

Different situation to a house bought together, both party pay 50/50 for only 5 years, then the person staying in the house pays for another 20 years, but the first is expecting 50/50 equity. Or say person staying put a 20% deposit etc...

I think what is fair is dependent on the individual circumstances on which a judge based their decision.