Getting Divorced and she wants to take over mortgage

S

sully

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Hi All,

We are in the process of applying for a divorce, and have a Mortgage of 320k with house value approx 300k and tracker rate of .75% above ECB rate.

So Essentially the ex wants to take my name off mortgage and take it over on her own, and i just walk away is this a good idea for me? is there anything i am not considering here. the bank is seemingly agreeable to this as ex will be joined on mortgage with her partner, and both are in good state jobs.

I put about 150k into this house it was bought in 2007.
 
The tone in which you ask the question suggests that your decision will not be coloured by anger or hurt, that you want to approach things in a rational way. I assume that your figures of €300k for house value and €320k for the outstanding mortgage are about right. I assume also that your ex contributed to the cost of the house and the servicing of the mortgage while you were together.

Don't even think about what the house cost in 2007. What you now have, on the figures you give, is a half-share in a €20k negative equity situation. It's not the worst NE, because €20k is only a small percentage of the value of the house, and a tracker takes the sting out of the situation. Whether the house might appreciate in value in the medium term is anybody's guess, and basing your decision on a guess is chancy. So I think you should base your decision on things as they are today.

What's in it for your ex and her partner? In effect, they are offering you €160k for your interest in the house that is worth about €150k. But she probably gets to live where she wants to live, and accepts that the premium over market value is a good deal for her.

For both of you, disengaging from the shared house and mortgage situation could be a useful step in tidying-up your affairs.
 
yeah the house has gone down by theat much in the few years Since. House was 465 when bought and then stamp on top took it close to 500k and then put in new kitchen and other bits for 50K.
Its kind of why i a reserved about selling as i have put a lot in it and its quite hard to walk away with nothing alright but ti think that might be more an emotional thing than a rational thing and i want the rational decision here.
 
Hi Sully

This is a very interesting question. I presume that you did no agreement when you bought the house.

Scenario 1
Let's assume the following figures to illustrate a way of looking at this. Please provide the correct figures:

|total|you|her
Cost of house|500|250|250
Deposit|150|150|0
Original Mortgage|350|100|250
Current mortgage|320|85|235
Current value|300|150|150
Equity|-20|65|-85

Based on this, she should give you €65k for your share of the house.

Scenario 2

If we assume that she put up half the deposit and made half the payments, then what is the position?

If you offered me a house worth €300k with a mortgage of €300k on a Standard Variable Rate of 4%, I would be indifferent to the deal.

If you offered me a house worth €300k with a mortgage of €260k on a Standard Variable Rate of 4%, I should grab the deal.

Depending on your assumptions a cheap tracker of 0.75% is the equivalent of a €260k SVR.

Are you sure that the bank is happy to replace you on the mortgage with the new guy? Does he not have to buy your share of the house? Will the bank leave them with the cheap tracker? Which bank is it?

Option
"No dear, that is not a good deal for me.
Let's rent out the house for €20k a year in rent and pay the mortgage out of the rent.
If you wish, you may be the tenant, in which you give me €10k a year rent and I will continue to pay half the mortgage"

Brendan
 
Hi Brendan,

Thank you for your response, it gives me a lot more to ponder on now, especially with the Amount of money i put in and current value of the house, i just assumed that money was now gone. Also interesting that you pointed out the difference in the tracker and SVR.

There was no agreement in place when we bought the house.

Her deposit would not have been 0, but probably about 40-50k. And i included 50k in renovations in the house in my figure above, and she probably put in 10-15K for the same. I don't know the exact amounts but these are fairly accurate and if she was to dispute these figures i don't know if i could accurately prove all these amounts as i shared all i had in good faith at the time.

I never factored in the repayments and deposit, i just was willing to write that off as i thought in a divorce everything would be split 50/50 anyways. And if the house was sold it would be split that way.

I think if i suggest either option she will just want to sell the house and then we would be equally liable for the negative equity.

If she was open to the rental option and sell at some time in the future, i reckon we would get 1200 to 1300 pm rental.

The mortgage wasn't paid for about a year when the split was acrimomious. So she says this is also what she is taking on but i think this is just the same as being part of the mortgage.

The Mortgage is with Ulster Bank. She says that his name will go on the mortgage, but i am not aware if she gets to keep the tracker rate? I didn't really go into that detail as i thought that was none of my concern. But she is potentially able to cover and get the mortgage on her own right now anyways i reckon.

Cheers,
Sully.
 
Scenario 1 Revised


|total|you|her
Cost of house|500|250|250
Deposit|150|100|50
Original Mortgage|350|150|200
Current mortgage|320|135|185
Current value|300|150|150
Equity|-20|15|-35

Based on this, she should give you €15k for your share of the house.

If she paid 15 for the improvements and you paid 35, then she owes you €10k for the improvements. That way, you will both have paid €25k for them.

So she owes you €25k in total.

I am assuming that you shared the repayments equally?


I think if i suggest either option she will just want to sell the house and then we would be equally liable for the negative equity.
Click to expand...

Can you take over the mortgage yourself? She would still owe you €25k, but you could write this off as you would be getting the benefit of the tracker.

Renting the house to a third party
Annual rent |€14,000

Interest|€5,000|320k @1.5%
Other costs|€2,000|
Profit|€7,000

This looks like an attractive option.

The mortgage wasn't paid for about a year when the split was acrimomious. So she says this is also what she is taking on but i think this is just the same as being part of the mortgage.
Click to expand...
That is all history now and is reflected in the balance outstanding on the mortgage.

Strategy
I think you should put down all the options on paper.

  1. She buys the house from you
  2. You buy the house from her
  3. Your sell the house
  4. You rent out the house
Do up the numbers and then you have a basis for discussion.



Brendan
 
The Mortgage is with Ulster Bank. She says that his name will go on the mortgage, but i am not aware if she gets to keep the tracker rate?
Click to expand...

I don't think that you would keep it with any other bank, but UB is allowing people to transfer their trackers. I think you could make a good case for availing of this.
 
I think Brendan's logic is pretty good where separate parties own a house together, though I'd assume there are no guarantees on what would happen if there is no prior contract.

I was just thinking whether this is all academic for a couple that was married. Would everything become 50/50? In this scenario the €160k mortgage payoff for an interest worth €150k would be good. This would only make sense if possessions other than the home were also split 50/50.
 
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