Buying a second (?) home after divorce

crispy_chris

Hi all,

I'm currently divorced and part of our divorce agreement was that my ex-wife remains in the property with our children and I pay her monthly child maintenance and that is meant to cover the mortgage payments as well (wording in the divorce agreement was that my wife is responsible for all mortgage payments and indemnifies me against them - which I take to just mean if she stops paying, I will pay the mortgage and pay her less monthly as a result).

I am still on the mortgage, but don't live at (or have access to) the property. The lender is aware of all of this.

Ultimately I have two questions:

• If I look at getting another mortgage in the future do I need to include the current mortgage as an outgoing, or the child maintainence, or both, or do I just subtract the total outstanding balance of the mortgage from what a lender would lend me?
• Would I pay the second home stamp duty on a new house purchase, even if it's my primary residence, as a result of technically owning two houses?

Many thanks in advance for any help you can provide!

Pixie5740

Each lender is different but the mortgage payments and child maintenance are expenses and will impact the amount lenders are willing to lend you.

You won't technically own two properties, legally you will own two properties. However, what's important in terms of SDLT is how many properties you have a beneficial interest in and by the sounds of things you have no beneficial interest in your formal marital home therefore the higher rate of SDLT will not apply.

Thrugelmir

Maintenance would remain to be paid directly to your ex. As a consequence this doesn't stop your lender pursuing you for any mortgage arrears. As the contract remains a joint one between you and your ex. The indemnity could amount to a greater share of equity in the property. Than was agreed at the time of your divorce.

With regards to a further mortgage. The notional liability of the existing mortgage would be a factor in any decision made.

crispy_chris

Thanks both, so for the purposes of working out what a lender might lend me, should I add up the two figures (Mortgage payment & child maintenance) and use that as my outgoing figure, even though in theory one is meant to be encompassed by the other?

If that's the case that's fine, I just wanted to be sure. And thanks for the SDLT info

Edit: Sorry, further question. When you say "beneficial interest" what does that actually mean? I'm still going to get some equity out of the house my wife lives in when she sells it. Does that count?

Further edit: So I've had a bit more of a look and I'm pretty confident I do have to pay the higher rate SDLT. At least I know now!

Thrugelmir

crispy_chris wrote: »

even though in theory one is meant to be encompassed by the other?

Child maintenance is your contribution to your children's everyday living costs. Not just for a home, but food and clothes.

crispy_chris

Thrugelmir wrote: »

Child maintenance is your contribution to your children's everyday living costs. Not just for a home, but food and clothes.

Absolutely correct and it's an amount far above what I am required to pay for that very reason. It's just that in the consent order it specifically states that the child maintenance indemnifies me from mortgage payments. Though it sounds like that doesn't matter to the banks, which is fine.

Sambella

http://nicolawilliams.co.uk/blog/property-adjustment-order-and-stamp-duty/

There was a change in the last budget by the Chancellor which may help.

SDLT_Geek

Before paying the higher rates of SDLT take a look at the changes made by the Autumn Budget on 22 November 2017. There is a change to help people in your position if there is the right kind of !!!8220;property adjustment order!!!8221; in place.

The HMRC pdf guidance on the higher rates has not been updated to include this, though this is being put right soon......

crispy_chris

Thanks both, unfortunately the changes were only for first time buyers which I'm not. So I'll just have to accept a £7k stamp duty bill rather than a £1k one!

SDLT_Geek

These changes are not for first time buyers only. Other changes in that Budget were for first time buyers.

SDLT_Geek

SDLT_Geek wrote: »

Before paying the higher rates of SDLT take a look at the changes made by the Autumn Budget on 22 November 2017. There is a change to help people in your position if there is the right kind of !!!8220;property adjustment order!!!8221; in place.

The HMRC pdf guidance on the higher rates has not been updated to include this, though this is being put right soon......

HMRC have now updated their HRAD Guidance (stamp duty land tax higher rates on additional properties which most people call the 3% SDLT surcharge) and put it into their manual. They have included a section on the position of someone who is divorced and retains a share in the previous marital home by virtue of a court order requiring that the ex matrimonial property be retained for a period for the benefit of someone else.
Here is a link to the update guidance: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09820
And here is an extract from it:
Divorce and Civil Partnership dissolution

Sometime a divorc!e or ex-civil partner is required by court order to retain an interest in a former home. Such an interest will be ignored so long as it meets certain conditions.
A `major interest` in a property is ignored for higher rates purposes where a purchaser of another property –

• buys it on or after 22 November 2017,
• owns no other residential property that meets Condition C [see SDLTM09780], or if they do,
• meets the `property adjustment order` condition.

The `property adjustment order` condition is that the major interest in a former matrimonial home is the subject of a relevant court order, and made in favour of another person, for example a former spouse or a child.
The relevant court orders are -
(a) an order under section 24(1) (b) of the Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings),
(b) an order under section 17(1) (a) (ii) of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders after overseas divorce) corresponding to such an order as is mentioned in paragraph (a),
(c) an order under Article 26(1) (b) of the Matrimonial Causes (Northern Ireland) Order 1978 (property adjustment orders in connection with divorce proceedings etc.),
(d) an order under Article 21(a) (ii) of the Matrimonial and Family Proceedings (Northern Ireland) Order 1989 (property adjustment orders after overseas divorce) corresponding to such an order as is mentioned in paragraph (c),
(e) an order under paragraph 7(1) (b) of Schedule 5 or paragraph 7(1) (b) of Schedule 15 to the Civil Partnership Act 2004 (property adjustment orders in connection with dissolution etc. of civil partnership), or
(f) an order under paragraph 9 of Schedule 7 or paragraph 9 of Schedule 17 to the Civil Partnership Act 2004 (property adjustment orders in connection with overseas dissolution etc. of civil partnership) corresponding to such an order as is mentioned in paragraph (e).