Family assisted mortgages in divorce

Barahp

I wondered if anyone had any experience/knowledge of family assisted mortgages?

My younger sister, a SAHM with 2 young children is facing divorce. She and BIL have c. £90k equity and a £110k mortgage.

I co-own my own home with the bank.

Presumably the only way to keep my sister's house is to buy out BIL (let's assume £45k to him). With the kids involved, possibly a charge can be put on the house rather than paying him immediately?

That leaves a mortgage of £110k with available equity of £45k (I would assume for these purposes we net off the charge of £45k as it is due to someone else and the bank can't take it).

Now, I think I could service that mortgage of £110k on top of my own. But could I persuade a bank to lend? If I buy into the house, I get hit with stamp duty on a second home. If I guarantee the mortgage for my sister instead - would I have to put up my own home as capital? I really don't want to put myself in a position where my own home is at risk. I could possibly put some extra cash down as a deposit/offset, but I don't want to put up my own home.

The problem with not buying into the mortgage is that my sister will not have an independent income - at least not immediately. She will get child support, possibly some benefits, but won't have any employment income until she finds a job. (With her circumstances, realistically this is going to take a while and it will be a PT unskilled job, so not a big earner.)

Possibly my BIL could stay on the mortgage, with some kind of deed drawn up to indicate he is only entitled to £45k on the eventual sale of the property and the rest belongs to my sister? Then it's just a case of me giving my sister the money to pay the mortgage each month (which is doable).

If anyone has any ideas and/or any experience of family assisted mortgages, please shout. To be totally transparent about what I am hoping to achieve, any cash that I use to pay my sister's mortgage is not money I expect to ever see again. I am happy to help out of disposable income; I just don't want to risk my own home.

Many thanks in advance.

AnotherJoe

I think your initial presumption is incorrect. Most probably your sister will be able to stay in that house until youngest child is 18.

Silvertabby

I think your initial presumption is incorrect. Most probably your sister will be able to stay in that house until youngest child is 18.

Not necessarily - it depends on the terms of the divorce. Plus, of course, only if the mortagage continues to be paid - if OP's sister can't pay and ex husband won't pay, then the bank won't wait until the youngest is 18 before repossessing the house.

Barahp

Silvertabby wrote: »

Not necessarily - it depends on the terms of the divorce. Plus, of course, only if the mortagage continues to be paid - if OP's sister can't pay and ex husband won't pay, then the bank won't wait until the youngest is 18 before repossessing the house.

Yes, for a number of reasons, he cannot be relied on to meet the mortgage.

He may not have any qualms over his two children being kicked out of the only home they have ever known, but I would like to try to help minimise disruption for them if I can.

AnotherJoe

But OP said she would contribute to mortgage so sister would not get kicked out through repossession. Yes of course its possible she might have to sell house, but the odds are in her favour with two very young children.

And if OP paid her contributions to sister as a loan to be held against value of house, then she would have a good claim against part of the equity when it came to be sold at youngest reaching 18, if ex had not been paying over that time.

Barahp

AnotherJoe wrote: »

But OP said she would contribute to mortgage so sister would not get kicked out through repossession. Yes of course its possible she might have to sell house, but the odds are in her favour with two very young children.

And if OP paid her contributions to sister as a loan to be held against value of house, then she would have a good claim against part of the equity when it came to be sold at youngest reaching 18, if ex had not been paying over that time.

Wouldn't this require my BIL being happy to stay on the mortgage? I don't see how my sister could get a normal mortgage solely in her own name as she has no source of income.

Could the courts force him to stay on the mortgage in name as part of a divorce settlement (to facilitate my sister and the kids staying in the house)?

I don't mind paying the mortgage (and not getting any money back) for the sake of my sister and the kids, but I would want to somehow protect that contribution for their benefit. I don't care if 'my' contribution is ringfenced for me or for my sister, I just don't want him getting any of it.

Is there a way of fixing his equity at the time of the split rather than allowing for him to get a share of any uplift in the next 15 or so years? (Assuming I pay the mortgage in this period and he doesn't.)

I have limited understanding of what might be possible in a divorce settlement, so please forgive my ignorance.

AnotherJoe

Barahp wrote: »

Wouldn't this require my BIL being happy to stay on the mortgage? I don't see how my sister could get a normal mortgage solely in her own name as she has no source of income.

He doesn't have to be happy about it. There are plenty of posts in here from people who aren't "happy" about being ona mortage in these circumstances.

Could the courts force him to stay on the mortgage in name as part of a divorce settlement (to facilitate my sister and the kids staying in the house)?

Yes. That's very common. You obviously need to have your sister go see a solicitor.

I don't mind paying the mortgage (and not getting any money back) for the sake of my sister and the kids, but I would want to somehow protect that contribution for their benefit. I don't care if 'my' contribution is ringfenced for me or for my sister, I just don't want him getting any of it.

Is there a way of fixing his equity at the time of the split rather than allowing for him to get a share of any uplift in the next 15 or so years? (Assuming I pay the mortgage in this period and he doesn't.)

I have limited understanding of what might be possible in a divorce settlement, so please forgive my ignorance.

Your sister needs to see a solicitor that specialises in divorce. You should go too.

Barahp

AnotherJoe wrote: »

He doesn't have to be happy about it. There are plenty of posts in here from people who aren't "happy" about being ona mortage in these circumstances.

Yes. That's very common. You obviously need to have your sister go see a solicitor.

So I'm barking up the wrong tree with a specialist mortgage? I just need to be able to afford the mortgage repayments on my sister's behalf?

I will look for a firm specialising in family law then rather than a broker.

Thrugelmir

Barahp wrote: »

So I'm barking up the wrong tree with a specialist mortgage? I just need to be able to afford the mortgage repayments on my sister's behalf?

I will look for a firm specialising in family law then rather than a broker.

Starting point is a solicitor and an agreement reached as to the division of assets, payment of maintenance etc. Until then. Difficult to say what options are available.

AnotherJoe

Barahp wrote: »

So I'm barking up the wrong tree with a specialist mortgage? I just need to be able to afford the mortgage repayments on my sister's behalf?

I will look for a firm specialising in family law then rather than a broker.

To use another idiom, you are putting the cart before the horse.

As Thrugelmir says, sort out the financial settlement of the divorce first before deciding what needs to be done with mortgages.

Number75

Absolutely see a solicitor first.
You're racing in which presumptions of 50% equity.
But your sister needs to include all marital assets.
He might easily have a pension pot worth more than £90K, in which case she could agree to him taking all the pension and her taking all the house.
Then also keep him on mortgage until her youngest is 18 (there's usually be a clause agreeing to take steps to take him off as soon as possible) - in which case she pays the mortgage and he owns none of the house so she doesn't have to worry about uplift of this theoretical £45K.

The courts will look at the housing needs of both parties though - so if she's trying to stay put in a 4 bed in the best street in town, they could say it's fair that she moves to a 3 bed 10 mins away that's £50K less.

All of this needs to be thrashed out between solicitors.

There's certainly not rule that he gets 50% of the equity anyway - with two young children, and having stopped work to care for them, her solicitor will argue for more.

Forget mortgages for now!