Question on divorce and equity

[buymeabar]

Hi All,

Currently going through a fairly amicable divorce (ish). A question for the masses: Say if we have 150k equity in our house at present, which leaves us both 75k if we sold today. She wants to buy me out and continue to live there, but she can only raise 40k. Could I/we possibly do the following:

- she gives me 40k so I can move on, put that as deposit down on a place of my own. I come off the mortgage for the old place.

and

- as I'm effectively leaving 35K equity in the house, can I have something legal drawn up that means in 5 years time she sells up/remortgages etc and gives me 50% of the equity in the house at that time (minus the 40k I've already have)?

The thinking behind this is that we can both move on, but as she's a little tight on cash I effectively lend her some money for a time (the 35k that she can't afford to give me yet) and my 35k is still working for me as the value of the house she'll be in gains value.

Is this a good idea, and is it feasible? Things I'm thinking about are: what happens in 5 years time if we have fallen out? Can I have an interest registered at the LR for 50% of the equity at time of sale etc.

Any advice would be greatly appreciated.

PS: Yes there are kids involved but we're taking care of those separately and we've already agreed finances for them.

[Jim1556]

My mate did exactly that some years ago, think it's called a legal charge or something. Not sure on the terminology.

She was a right bh about the divorce, he was very lucky but had a good brief.

When she eventually sold the house last year, he bought a Porsche with the proceeds, now she's really pissed off when he collects his son in it!

You need to speak to a solicitor...

[barryrs]

As a above a legal charge on the property would be the way forward however their might be some problems with this.

Is she borrowing to fund the £40k and will the lender allow a substantial charge on the property?
You are exposing yourself to some risk as if the property is repossessed you may loose some or even all of the money owed.

[PurpleMoonlight]

Google Mesher Order

[battered]

This is what your solicitor gets paid for. There's a lot at stake, so invest a coupla hundred in getting it right.

[anonymous-user]

If serious money and peace of mind are at stake, DO NOT take advice from an internet car forum. Not even about cars.

[ging84]

make sure you both fully understand what the deal is
it's no good one of you thinking the other is entitled to a fixed 35k and the other thinking they are entitled to 10% of a 350k house, as one of you would likely end up upset when it comes time to pay you off.

[turbobloke]

Breadvan72 said:

If serious money and peace of mind are at stake, DO NOT take advice from an internet car forum. Not even about cars.

Above advice excepted of course

[anonymous-user]

Pop will eat itself.

[buymeabar]

Thanks all, appreciate the feedback.

- Will get a solicitor involved. I was just wanting to know what we're thinking of isn't pie in the sky stuff.

- Funding: she's borrowing from family so they're not bothered if there's to be a charge on the property.

- On sale: if she's giving me 40k for my part of the equity, when she does come to sell or remortgage the house in 5 years' time, we're being specific that she doesn't give me the remaining 35K, she's giving me 50% of the equity on that house at the time of sale, minus the 40K that she's already given me.

Cheers again. Will investigate a solicitor now. Part of me did think that it's a ballache rather than simply selling up now and splitting the equity, but I'd like my kids to enjoy this house which has only just been extended and done just how we wanted it. Plus, to some extent, my money is working for me. Yes I'll have to live in a more modest house for 5 years, but then I get to blow the money on an RS6 or something (or maybe be more sensible)!

[Red Devil]

PurpleMoonlight said:

Google Mesher Order

That is most often used where there is a dependent child/children under the age of 18. The OP has not mentioned whether there are any.
My impression is that he is looking to having a simple deferred charge on the property. That nay or may not be the best solution.
There are potential complexities/pitfalls which mean that it would be folly not to pay for expert professional legal and financial advice.
http://www.tanfieldchambers.co.uk/resources/articl...

[Nollub]

Two things spring to mind:

Is she likely to be able to get a mortgage on the remaining debt (the original mortgaged amount plus £35k)? The answer to this (i.e. can you get your name off the mortgage) will have a major impact on your ability to raise your own mortgage.

I think you have overestimated your remaining interest going forward if you are given £40k towards your share of the equity. If the total equity is £150K your other half will own £115k of that equity (the original 50% of £150k plus the £40k she will have paid to you). Your interest will only be £35k out of the total of £150K so your interest would be 7/30 and hers would be 23/30.

[ging84]

buymeabar said:

Thanks all, appreciate the feedback.

- Will get a solicitor involved. I was just wanting to know what we're thinking of isn't pie in the sky stuff.

- Funding: she's borrowing from family so they're not bothered if there's to be a charge on the property.

- On sale: if she's giving me 40k for my part of the equity, when she does come to sell or remortgage the house in 5 years' time, we're being specific that she doesn't give me the remaining 35K, she's giving me 50% of the equity on that house at the time of sale, minus the 40K that she's already given me.

Cheers again. Will investigate a solicitor now. Part of me did think that it's a ballache rather than simply selling up now and splitting the equity, but I'd like my kids to enjoy this house which has only just been extended and done just how we wanted it. Plus, to some extent, my money is working for me. Yes I'll have to live in a more modest house for 5 years, but then I get to blow the money on an RS6 or something (or maybe be more sensible)!

I can be almost certain you are both not in agreement over that, it seems completely unfair, either you've not thought it through or you're a total shark.
Why do you think you should get 50% of the uplift on a house you have a minority stake in, and no liabilities, is have no idea. But this agreement would give 50% of any capital your ex wife repays from the mortgage, how you can think you are entitled to that is mind boggling.

[Rude-boy]

Step one - investigate mortgage availability for the sort of debt that the Mrs will have to take on. If that is workable then one of you needs to take full advice and report back to the other (assuming all amicable still!) and then you can agree on matching instructions to your respective advisors.

Do not:-

1. Fail to get proper paid for and insured legal advice.
2. Fall out any more than is absolutely necessary - I have seen 'happy' divorces turn sour over the most silly of things to the detriment of all.
3. You will both need independent legal advice but that does not mean that you can't both get your plans in order with one of you seeing their solicitor and the other instructing later in the day once the deal has been agreed. This will only work if point 2 is followed and you are both 100% open and honest.
4. Chances are that, if she will have PR for the kids, if the deal is less than the absolute maximum SHE can get her solicitor will let her know all the many wide and varied ways your balls could be nailed to a wall for all eternity. This is were you will really find out who you married as some turn and some say words to the effect of "I hear what you have said but I am happy with the deal we have agreed and I just wish you to confirm that it is legal and to put it into effect legally. I will not be paying you for any attempt to up my share, nor are you instructed to pursue that course of action."

Bottom line - get proper legal advice, but make sure what she can do before you even think of paying money out backing a non starter.

[buymeabar]

ging84 said:

I can be almost certain you are both not in agreement over that, it seems completely unfair, either you've not thought it through or you're a total shark.
Why do you think you should get 50% of the uplift on a house you have a minority stake in, and no liabilities, is have no idea. But this agreement would give 50% of any capital your ex wife repays from the mortgage, how you can think you are entitled to that is mind boggling.

Ha, well we've discussed it and she seemed fine with that idea (for now - as others have said that might change).

I really must be a total shark though as how dare I try and help her stay in a house that she'd struggle to get a mortgage for otherwise, especially when the cause of the breakup was her banging someone else. If she's wanting help, I want to get something out of it as well or I'd have just demanded we sell up right now.

[buymeabar]

Rude-boy said:

Step one - investigate mortgage availability for the sort of debt that the Mrs will have to take on. If that is workable then one of you needs to take full advice and report back to the other (assuming all amicable still!) and then you can agree on matching instructions to your respective advisors.

Do not:-

1. Fail to get proper paid for and insured legal advice.
2. Fall out any more than is absolutely necessary - I have seen 'happy' divorces turn sour over the most silly of things to the detriment of all.
3. You will both need independent legal advice but that does not mean that you can't both get your plans in order with one of you seeing their solicitor and the other instructing later in the day once the deal has been agreed. This will only work if point 2 is followed and you are both 100% open and honest.
4. Chances are that, if she will have PR for the kids, if the deal is less than the absolute maximum SHE can get her solicitor will let her know all the many wide and varied ways your balls could be nailed to a wall for all eternity. This is were you will really find out who you married as some turn and some say words to the effect of "I hear what you have said but I am happy with the deal we have agreed and I just wish you to confirm that it is legal and to put it into effect legally. I will not be paying you for any attempt to up my share, nor are you instructed to pursue that course of action."

Bottom line - get proper legal advice, but make sure what she can do before you even think of paying money out backing a non starter.

Thank you, busy getting all that in hand.

[ging84]

buymeabar said:

Ha, well we've discussed it and she seemed fine with that idea (for now - as others have said that might change).

I really must be a total shark though as how dare I try and help her stay in a house that she'd struggle to get a mortgage for otherwise, especially when the cause of the breakup was her banging someone else. If she's wanting help, I want to get something out of it as well or I'd have just demanded we sell up right now.

Well good luck with that one
Sounds like there are kids involved that she is keeping, depending on thier ages with £150k of assets, unless there is a big earning imbalance in her favours you will be lucky to come out of this with anything other than on going child support liabilities, so i would not be pushing my luck like that if i was you.

[anonymous-user]

You might want to check where you stand regarding Capital Gains Tax on the element you decide to leave in the house - should you realise a profit on it later on.

When you find the answer, please let me know;)

[JonRB]

In my divorce we had a Declaration of Trust drawn up which stated what percentage of equity each party was entitled to upon sale of the property. It is also important to change the ownership of the house from "Joint Tenants" to "Tenants in Common" (see this link for more info).

It's also worth bearing in mind that for more expensive properties, there could be a Stamp Duty implication on a transfer of equity, unless the transfer is the result of a Consent Order as part of a divorce, in which case there is no Stamp Duty to pay.

[Jim1556]

ging84 said:

I can be almost certain you are both not in agreement over that, it seems completely unfair, either you've not thought it through or you're a total shark.
Why do you think you should get 50% of the uplift on a house you have a minority stake in, and no liabilities, is have no idea. But this agreement would give 50% of any capital your ex wife repays from the mortgage, how you can think you are entitled to that is mind boggling.

Not sure why you think it's unfair?

Let's say there's no part cash buyout.

They both sign a legal document saying he owns 35% of the equity.

If the house (let's say £300k) in 5 years time is worth £500k, he's legally entitled to £175k not £105k, where's the argument? His asset has gone up in value (or not depending on the market).

I see no issue with this...