Mortgage to buy out spouse - close to retirement

[TVRBRZ]

Regrettably facing a divorce and I'm keen to buy out the other half. Kids grown up, assets pretty much 50/50.

Rough figures are £450k house, £250k mortgage. So I need to find £100k to buy her out and then take over the mortgage.

Trouble is, I'm 59 and I want to retire at 60. I've approx £500k in SIPP/MoD pension. I can work to 65/67 if necessary. Salary approx £75k.

Given how difficult it was to get the mortgage on the house (bought 2 yrs ago) because of age, which of the following two options are more guaranteed to result in a successful mortgage application?

1. Declare that I plan to work till 70 and just get a normal mortgage of £350k whilst still working.

2. Retire at 60, take the 25% tax free pension lump sums (£125k). Give £100k to Ex, £25k towards mortgage and get a RIO 50% equity mortgage. (I plan to do PT consultancy to supplement remaining pension).

I'm keen to understand what would be the best lending risk from the perspective of the mortgage company? I would not want to initiate a buy out now only to fail to secure £350k. Equally, I don't want to pay to keep my ex in the house while I wait till I'm 60 only to find i can't get a RIO for £225k.

Any other advice or suggestions gratefully received, thanks!

[bennno]

On a related note, have you agreed a financial settlement related to the divorce? Might there be a claim on your pension?

If not then that seems to be the logical answer in raising the funds by using your 25% allowance - although our Govt might meddle with it in November.....

[TVRBRZ]

Financial settlement 50/50. Her pension is virtually the same value.

We are in Scotland, I moved out a year ago, she wants a divorce. I can either agree now and try to buy her out now, or I can not agree to a divorce, pay half the mortgage and she stays in the house another 12 months. After two years apart she can force me to divorce, but by then I get to 60 and can do option 2.

Sounds a bit machiavellian but nothing to what I've been getting. Unlikely she will buy me out as she wants to downsize.

[bennno]

TVRBRZ said:

Financial settlement 50/50. Her pension is virtually the same value.

We are in Scotland, I moved out a year ago, she wants a divorce. I can either agree now and try to buy her out now, or I can not agree to a divorce, pay half the mortgage and she stays in the house another 12 months. After two years apart she can force me to divorce, but by then I get to 60 and can do option 2.

Sounds a bit machiavellian but nothing to what I've been getting. Unlikely she will buy me out as she wants to downsize.

Good luck with this, perhaps 3 valuations on the house and then go with the lowest less agents sales fees etc.

It's a very slow and declining market generally.

Using your pension to pay off the wife as part of a remortgage in to your name and an agreement to move out simultaneously would seem logical.

[SAS Tom]

Is it confirmed 50/50?

A couple I know despite going to their solicitors saying 50/50, between the family court and solicitors the agreement certainly favoured the woman.

[SunsetZed]

Is there a reason you can't take the tax free sum and use option 2 now specific to your pension? Usually you can do this from 55.

[TVRBRZ]

MoD pension only pays out LS from age 60 and I have to stop full time work to get the pension. SIPP and MoD pension LS both £60k ish...which is why I need both to get near to the buy out equity

[SunsetZed]

Understood. If you're divorcing on good terms maybe you can set the buyout date in the future to account for this?

[ThingsBehindTheSun]

This happened to me at 40, it ruins you financially but at least I had enough working years left to get myself back on my feet. As others have suggested, is she really going to be happy with £100K to walk away from the house? In my experience, once she gets talking to their friends who will be living their divorce fantasies through you wife, she will go to a solicitor who will tell them they should go for 70% of the house and half your pension.

The issue you are going to have is do you have a high enough income to take over the mortgage on your own? Even if you do, they will probably only lend until you are 70 which means the payments are going to be very high.

In my experience of asking similar questions to Santander they seemed very uninterested in lending me any money, and this was when you could get a mortgage for 1.5%.

A stty thing to happen, especially when you are winding down and looking forward to retirement.

[TVRBRZ]

Thanks to everyone for the replies, but I'm really just after the academic "which option is a lender more likely to accept?"

It is a given that the suggested amicable 50/50 is removed at the last minute, and I'll just have to deal with the worst if it happens- ie house gets sold to cover the settlement.

However the question for this finance thread is my acceptability as a single mortgage applicant- retired 50% LTV or still working but 80% LTV?

Thanks

[Sarnie]

I'm a Mortgage Broker and can help you with this if required.

I can't answer your specific querys on here as it would require a lot more personal info............feel free to drop me a mail if you want a chat?

[TVRBRZ]

Thingsbehindthesun, apologies I did not to appear dismissive of what you went through - thank you for your post, I seem to be quite abrupt and single minded at the moment!

[TVRBRZ]

Sarnie, many thanks for the offer but when I do seek broker advice I'd prefer if they were based in Scotland.

Cheers anyway

[Sarnie]

TVRBRZ said:

Sarnie, many thanks for the offer but when I do seek broker advice I'd prefer if they were based in Scotland.

Cheers anyway

No worries, we have lots of clients in Scotland!

Good luck with it