Separating with joint mortgage - best option?

[Grasscutter]

About to go through marriage separation and the biggest financial issue will be the house - joint mortgage with 48 months left to pay at 730 per month.

House is worth between 240 and 250k.

I would like to get a new mortgage to buy ex's half but not sure if I'd get it - earn 37,000 p.a. , have 3 kids 17,15 and 12. I can work out income but can't factor in maintenance when I don't know how much I'll get - would like a definitive answer from the bank before starting mediation but won't know maintenance till after mediation so its a chicken and egg situation. Also WO seeing does it make sense to borrow from bank to give him larger lump sum or would it be possible to subtract projected maintenance from half the value of the house?

Another option is my father might buy his half of the house and I pay my father rent. Would that be legal?

 

[Brendan Burgess]

The mortgage balance is around €30,000.

The equity in the house is around €220k (250 - 30)
So you would need to pay him €110k and take over the €30k mortgage.
So you would need to borrow €140k

It's unlikely that a lender would give you this as it's almost 4 times your salary and you have three children.

You are presumably talking to a solicitor and all the following are in the context of an overall agreement on maintenance and any other assets, including pension schemes.

Option 1 Buy his half now and pay out of the maintenance.
You do all the legal work and end up owning the house.
You will have a mortgage of €30k in your own name.
You will owe him €110k .
Let's say he has to pay you maintenance of €1,000 a month, you pay this over the next 110 months.

You would have to pay the mortgage for the next four years and you would have no maintenance for the children, so this is not a good idea.

Option 2 You take ownership of the house in exchange for your share of his pension fund.

If he has a pension fund, you could take your half of the house in exchange for reducing your share of his pension fund by €110k.

You own the house outright, but you have no income in retirement.

This does allow a clean break and no dispute over pensions, early retirement, lump sums, etc.

Option 3 Your dad buys his half now
There is absolutely nothing illegal about this. It's a bit inefficient for tax purposes as your father would be paying 50% tax on payments from his daughter and you would be getting no tax relief. Your father would end up paying CGT on any gain in the value of the property if it's sold.

Option 4 Your dad lends you the money now to buy his half
This is much cleaner. You own the house and you owe your father the money rather than owe it to the bank.

The downside of this is that it takes the pressure off your husband to pay maintenance. He could argue that you are living rent free.

Option 5 Remain as joint owners of the house and agree to sell it when the youngest is 22

This seems the most likely outcome as your husband is obliged to provide for his kids.
You continue to pay the mortgage jointly.
Your ex pays you €1,000 a month which you spend on your children which is what it's supposed to be spent on
After 10 years, you put the house on the market and split the sales proceeds.

You could agree a clause saying that you had an option to buy the house after 10 years at its then market value.
Let's say that the house is then valued at €300k, you would then pay your ex €150k.

At that stage, your dad could get involved if you have not saved up the purchase price by then or if you can't get a mortgage.

Check with your solicitor, but I believe that as you own the house jointly, if either of you dies,the other would get the house, which is presumably what both of you would want.

 

[Grasscutter]

Thank you so much for that - most helpful. I have only consulted once with a solicitor on separation - she advised me to go through the free family mediation route to avoid costs. I know solicitors' fees will come into it at some stage but trying to avoid them for now. Mediation won't start till September but I want it to be as quick and painless as possible so would like to come to the table with a number of options like these.

Option 4 and 5 seem the most practical. I'd prefer 4 as I'd like as much as a break from him as possible but I do see your point of taking the pressure of him to pay maintenance however if I can prove that I'm repaying my father then surely that is proof of not living 'rent free'?

No pensions and no wills - not very financially responsible of us but on the plus side it makes splitting up easier - however it means option 2 is out of the picture.

Thanks so much - lots of food for thought.