House % split in divorce

benish

Hi, me and my wife are divorcing after 8 years. I’m moving out to rental house for the time being and she’s going to stay here in the house until something comes up she can move to, and until the 12k early repayment charges end in 18 months! 

We’re trying to come up with a separation agreement and have said we’ll split the equity at 75/25 in her favour. Going forward I’ll only be paying child maintenance and nothing more toward the house but will remain on the deeds until it’s sold and at that point I’ll get my cut. 

Question is, am I entitled to 25% of the equity when it sells, or 25% of its equity now as I move out? ! 

I know I won’t be contributing to pay off the mortgage but if the house value rises with inflation or as the market booms there could be a big chunk of money I’d be missing out on by agreeing the split on today’s value. 

Any advice please?!

thanks
Ben

RAS

Whatever you agree. Probably best to get it in writing.

gettingtheresometime

If you're going down the route of 25% of equity as it stands now, but selling in 18 months time, I'd get a written valuation of both the outstanding mortgage and the value of the house when you move out. That way there's no argument about amounts owed - as well as getting whatever you decide in writing, as RAS has already said.

benish

Cheers guys

I’ve had 3 valuations and got the redemption statements, so know what I’m entitled to right now. Just wondering I can have a 25% claim on any future increases whilst I’m still down as an owner of the house, even though I don’t live there!! 

RAS

That is up to you and your ex to discuss and agree, not something about which there are hard and fast rules.

If she's going to pay all the mortgage, then the solution might be different to if you're paying half?

theoretica

Also what if the value falls in the next 18 months?

benish

Ok, thanks guys. 

We’ve agreed on a % split based purely on the price at time of sale. 

Alias_Omega

Stop.  Do not move out.

What says she has to sell in 18 months?
What says she can't move a new partner into the property?

You are still liable for the mortgage, even whilst still paying Child Maintenance. 

What about workplace pensions?
What does she earn?
Have you spoken to a solicitor?

I'll say again, do not move out (just yet). 

Btw, separation agreements are pants. Just file for divorce, then go straight for a clean break consent order. Only once that is issued, you are safe. 

That consent order can list that the house must be sold in 18 months, percentage split, who is liable for the mortgage etc .

If you move out, you surrender the right to occupy the property. She can move someone in, stop paying the mortgage, then refuse to sell/move in 18 months time, because she has no job, is pregnant, doesn't want to, her family said not to, enter excuse etc..

You won't get a mortgage whilst your name is on that property...

sassyblue

Alias_Omega said:

Stop.  Do not move out.

What says she has to sell in 18 months?
What says she can't move a new partner into the property?

You are still liable for the mortgage, even whilst still paying Child Maintenance. 

What about workplace pensions?
What does she earn?
Have you spoken to a solicitor?

I'll say again, do not move out (just yet). 

Btw, separation agreements are pants. Just file for divorce, then go straight for a clean break consent order. Only once that is issued, you are safe. 

That consent order can list that the house must be sold in 18 months, percentage split, who is liable for the mortgage etc .

If you move out, you surrender the right to occupy the property. She can move someone in, stop paying the mortgage, then refuse to sell/move in 18 months time, because she has no job, is pregnant, doesn't want to, her family said not to, enter excuse etc..

You won't get a mortgage whilst your name is on that property...

The bit in bold. No he does not. Whilst his name is on the deeds he has a right to live there unless she obtains an injunction for some reason.

TBagpuss

benish said:

Hi, me and my wife are divorcing after 8 years. I’m moving out to rental house for the time being and she’s going to stay here in the house until something comes up she can move to, and until the 12k early repayment charges end in 18 months! 

We’re trying to come up with a separation agreement and have said we’ll split the equity at 75/25 in her favour. Going forward I’ll only be paying child maintenance and nothing more toward the house but will remain on the deeds until it’s sold and at that point I’ll get my cut. 

Question is, am I entitled to 25% of the equity when it sells, or 25% of its equity now as I move out? ! 

I know I won’t be contributing to pay off the mortgage but if the house value rises with inflation or as the market booms there could be a big chunk of money I’d be missing out on by agreeing the split on today’s value. 

Any advice please?!

thanks
Ben

Whatever you agree, but the 'standard' way todo it would be to work out what it would be based on today's values then work that out as a % of the gross value, and use that.
e.g. if the house is currently worth £300,000 and the mortgage £100,000, then 25% of the equity would be £50,000.
50,000 as a percentage of the house value is 16.6%. So you would be entitled to a lump sum equal to 16.6% of whatever the house is actually worth at the date !!!!!!'s sold (or your wife buys you out)

The benefit of this method is it mean that you don't benefit if she reduces the capital owing on the mortgage, becaue your share is based on today's equity, but you do get the benefit of any increase in equity due to house prices going up, and share the risk if they fall, so you should end up with an amount that gives you the same buying power as what you'd get if you were paid out straightaway.

The other way to do it would be to say you get £50,000 + interest, but that is more complicated to calculate and means you have to try to guess what a reasonable interest rate would be, and of course if house prices were to fall it could mean that you need up with a much larger share than planned.

It would be unfair to have a sum based solely on the price now, as that way you are effectively lending her your share, interest free, for the next 18 months, and if you have a share based on the equity when you are paid out, you get the benefit if she pays down the mortgage but could also wind out out of pocket if she went into arrears. 

I assume that the unequal split is on the basis of your being a much higher earner, and/or a split of other assets in your favour, but either way, I'd recommend running it past a solicitor before you finally agree and get an order or separation agreement drawn up.