Mesher order or sell home

[Divorcedandlonely]

Hello
I’m going through a divorce and have been to hell and back. Husband met another women and they recently bought a house together. We’ve been through court who have approved a draft order for a mesher order for me to stay in the marital home with our daughter. I’ve worked out the mortgage and bill payments and I can just about afford it, but what I wasn’t expecting was that I have to pay for all the maintenance and repairs on the house until it’s sold off. I questioned this but the judge said it’s standard if I want to stay there. It’s my husbands house but I would have to take over all the bills and mortgage and maintenance. The house will be sold if I meet someone else or when my daughter finished education. Has anyone been in this situation who can offer some advice. I though he would have to help out financially and I’m surprised he doesn’t need to pay for any maintenance. I don’t know whether to tell the court I don’t want to go ahead and to sell the house but I would have to rent. He has bought a house with this woman and I’m paying his mortgage off and paying for the maintenance on his house. It’s degrading

Okay, hang on, because there is some value for your ex in there not being a Mesher Order so that means room for negotiation. 60/40 was if he didn't get his capital for five years.

I don't know the size of his share of the equity but let's say 40% is £50k for illustrative purposes. So if he took 30% now instead it would be £37.5k.

Now you say he has bought another house. Mortgaged I assume? So let's say, again for illustrative purposes, he's borrowed £150k on a 20 year mortgage with a fixed deal of 2% for 2 years and he can overpay 10% per annum. So in year 1 he pays off £15k with the lump sum. That alone will save him over £13k over the life of the mortgage. Year 2 and his mortgage is now opening at £126k. He pays £12.6k overpayment. That's another £11k in interest over the life of the mortgage saved. Year 3, mortgage is now £105k and he reduces this with the rest of the lump sum of £9.9k. That saves another £8.8k in interest.

So you swapping out the 60/40 Mesher in my illustration would mean him giving you an extra £12.5k in equity in return for getting his capital now and saving around £33k in mortgage interest.

Apply the sums to your own situation and work out a figure where you can share the benefits of dumping the Mesher.

I get people saying it’s part mine but I’m going to be forced to sell it, it was my forever home and it’s not anymore. It changes everything once you’re told it has to be sold one day.

I think I’ll speak to my solicitor and see if we can renegotiate if we sell it now.

Good stuff. Now, unfortunately there was a big flaw in my above late night calculation (I forgot to take into account the impact of the lump sum reducing interest for your ex in five years time). Basically in my model above, I estimate it would cost £169k total to clear my illustrative mortgage with a Mesher Order and a 40% lump sum in five years time.

If on the other hand you took an immediate 70/30 split I estimate it would cost him £168k to pay down the same mortgage with some lump sum overpayments.

So I suggest you offer him a 70/30 split for immediate resale.

That’s very helpful thanks for all your help

@Divorcedandlonely

That’s very helpful thanks for all your help

No worries. If you give me the below information, I will work out an equity split where he can break even:

A) The total equity in your house;
B) The total equity in his house and the size of mortgage (assuming it has had to be declared);
C) A rough idea of what the interest rate is (I might be able to figure it out if you know the bank) and how long it will take to run.

If you can't give me B and C I can still make educated guesses (your ex's age would be helpful if you can't provide B and C).

If you are on low income then you are probably entitled to universal credit? If you sell now and rent you will probably lose any universal credit as you will have a lot of cash. If for example your daughter is in education another 7 years and you claim £300 per month universal credit, that's £25k. If you can't get a mortgage then you will get a lump sum now that will probably be gone before you retire. You are looking at renting long term. Will you have much pension? Would a mesher order giving you 60% definitely not be enough in the future for somewhere for yourself? Better than nothing.
Did the split of assets include pensions?

The equity in the marital home is about £70,000 remaining term is 10 years but I don’t know anything about his new house sorry. It’s much more expensive and bigger though.

@Wedontneednoeducation i get universal credit and yes the money I get would go on rent. None of us have a pension so that wasn’t included. I could get a part ownership if I was lucky

Okay, not a great deal of equity there but I'll work with what I've got and label where I use assumptions.

I'll just quickly address the very valid point about universal credit made above. If you have more than £16k in savings then you won't be eligible for universal credit. However, you do have two options with your share of the equity:

1. Buy another place because home ownership will not prevent you claiming universal credit; OR
2. Invest that money in a pension for the future, because again it won't affect universal credit if saved in this way.

Now, back to working out a fair deal to forego the Mesher:

1. Current equity is 60/40 which works out at £42k for you and £28k for him.

2. If you counter offer a 67/33 split in which he gets £23k immediately then he can pay off a chunk of his new mortgage early.

3. I'm going to assume he can pay off an extra £10k a year in his mortgage terms and conditions.

4. I'm going to assume he's the same age as you. So realistically he can only have a mortgage for another 12 years or so.

5. I'm going to assume the interest rate is around 2%.

On a twelve year mortgage, he could save around £5k in interest by using the lump sum to pay down early so it would cost him nothing to agree. He'd also get a clean break that will sweeten the deal for him.

Could you get a place with £49k deposit minus your share of sale costs?

Can you change to an interest only mortgage?

Thanks that’s very helpful. I wouldn’t get much with £49,000 but I could start looking around at what options I have locally.

The mortgage isn’t in my name but it can’t be an interest only.

@Divorcedandlonely

Thanks that’s very helpful. I wouldn’t get much with £49,000 but I could start looking around at what options I have locally.

The mortgage isn’t in my name but it can’t be an interest only.

Obviously there would be sale and moving costs plus stamp duty to factor in too (although stamp duty only applies on properties over £125k). Working full time on minimum wage will give you an income of around £18k which will give you a mortgage capacity of around £50k. Child maintenance coming in might give you a bit more.

I'm hoping that the reason your equity is low is because you're not in an expensive part of the country and £90k would buy you a decent flat. Otherwise maybe that's why a Mesher Order was suggested, because you had no prospect of buying anything (although all a Mesher will do is kick the can down the road to when your mortgage capacity is even lower).

Something else to add to potentially sweeten the deal for your ex would be stamp duty. If he's bought a new house but is still on the mortgage of your house, he would have had to pay extra stamp duty but you can get this extra back if you sell your second home (I.e. your house) within 3 years.

OP if you sell the cash and don't/can't buy somewhere else that will mean you'll have to live off those savings as you won't be entitled to benefits and you'll end up with next to nothing. I'd stay in the house for now if you possibly can, your daughter gets to stay in the family home and over such a short period hopefully it won't need too much maintenance. Then hopefully you'll have enough to buy yourself something even if you have to move to a cheaper area or buy a flat. At least it would be your own place.

@Tal45

OP if you sell the cash and don't/can't buy somewhere else that will mean you'll have to live off those savings as you won't be entitled to benefits and you'll end up with next to nothing. I'd stay in the house for now if you possibly can, your daughter gets to stay in the family home and over such a short period hopefully it won't need too much maintenance. Then hopefully you'll have enough to buy yourself something even if you have to move to a cheaper area or buy a flat. At least it would be your own place.

That's not necessarily true as the OP could put up to £40k of the money into a pension each year with an assumed tax reclaim so it would become £50k invested. That would generate an annuity of about £2k in income per annum upon retirement and will also have 10 years to grow.

However, your suggestion is certainly another valid option. There are sadly no easy options in this case as there is not enough money to go around and the couple only have around another decade of working life.

My advice would be to sell up now and get yourself established somewhere else while you are young. I was in exactly the same position as you, divorcing a difficult ex and clinging on to the thought that the house we owned would bring me security but I would have had to cover all maintenance and it was too risky so did a complete about turn and then pushed for a sale of the house. I got 60% of the house value and managed to get a mortgage as I'm working FT and buy myself a small property meaning I am in total control of my future now.

The problem with a mesher is that you are kicking the problem down the road - you may get 60% of the house value but be too old to get a mortgage once it sells so if that 60% isn't enough to buy you something outright, you are screwed. Much better to take that 60%, now and combined with a mortgage or put into a Shared Housing scheme, you could be a lot more stable

I always get shouted down when I discourage staying in the house. It has its advantages I understand. And disadvantages.

My ex left me when I was 45. The mortgage had 20 years on it youngest was 5. There was no way when she was 18 I would get a mortgage to cover what he would be owed. And both kids are both highly likely to still be at home. So down sizing wasn't an option.

Sometimes a complete clean break is more valuable. I do understand when you are at that point of separating moving and selling a house is the last thing you want to be doing.

Good luck.

How does the amount you would need to pay in rent compare with the mortgage payment?

Mesher orders (IMO) are not a good idea.

My now OH’s EW fought hard for one (despite there being enough equity in the house to rehouse both of them and have a clean break). She simply didn’t want to leave the house.

She was given a 6 year stay of execution on the house. By the time that date came - she refused to sell saying that she couldn’t afford to buy anything and she would be homeless (this was despite her having 62.5% of the equity and would get £250k).

My OH had to take her to court to enforce the consent order, which the judge did. Telling her that her housing needs weren’t his concern and she had had over 6 years to make plans.

The house was sold. The problem is she’s now 50 and has less borrowing capacity. At the time of the consent order she could of bought a 3 bed house in the same postcode. 6 years on, despite a sizeable deposit she’s been priced out of the market.

Better to face into this now than years down and the line.

Was just definitely the best option in my case - and for many. I didn't have enough equity for a home big enough for me and DC, not even shared ownership. But I will have enough for a flat just for me or a house somewhere cheaper in the future (when relocation won't affect DC in same way). Clearly the best outcome and less disruption for DC. Not kicking the problem down the road at all.

@Wedontneednoeducation

Was just definitely the best option in my case - and for many. I didn't have enough equity for a home big enough for me and DC, not even shared ownership. But I will have enough for a flat just for me or a house somewhere cheaper in the future (when relocation won't affect DC in same way). Clearly the best outcome and less disruption for DC. Not kicking the problem down the road at all.

With all due respect you can't possibly know that:

1. You don't know what a flat is going to cost relative to a house when you come to sell. Flats might increase in price more than houses, it can happen;

2. You don't know what the cost of sales are going to be such as how much an estate agent costs, how much you have to pay on removals, whether there might even be taxes on sale in the future (or what the stamp duty rates on purchases will be);

3. If you need any mortgage at all, you might find you don't qualify. Affordability rules have changed a lot in the past 15 years. They could change a lot more;

4. You don't know what is going to happen to interest rates. You might find you have to switch to an interest only mortgage at some point because you can no longer afford a repayment mortgage;

5. Also, you don't know how much you are going to have to spend in maintenance before the sale. You might get subsidence or some other drastic problem.

6. Cheaper areas might see prices rise faster than more expensive areas.

By using a Mesher Order, you not only cause problems for your ex who carries the risk of being locked out of the housing market altogether because of rising prices but you also carry all of the risks above yourself. You might still be comfortable with the risk and find it the best option, but best and good are not the same thing.

A most interesting thread and I do hope OP you get a fair deal and enough to buy your new home.

I had no idea there was such a thing as a mesher order but think this is what happened in my divorce 10 years ago as I have 80%equity in my 2 bed flat and my ex retains 20%. We were in our 60s and mortgage free. When I sell, remarry (no intention ever!) die or go into a home he gets his share. To balance the financial agreement in court I forgo the profit made on the flat we bought for retirement. Retrospectively I do have some regrets that I didn't go for a clean break of 50/50 but ours was a particularly nasty breakup as he came out as gay after 30 years marriage and a long term affair with another man. I was in a state of shock throughout the divorce negotiation.

@sunshinesupermum

A most interesting thread and I do hope OP you get a fair deal and enough to buy your new home.

I had no idea there was such a thing as a mesher order but think this is what happened in my divorce 10 years ago as I have 80%equity in my 2 bed flat and my ex retains 20%. We were in our 60s and mortgage free. When I sell, remarry (no intention ever!) die or go into a home he gets his share. To balance the financial agreement in court I forgo the profit made on the flat we bought for retirement. Retrospectively I do have some regrets that I didn't go for a clean break of 50/50 but ours was a particularly nasty breakup as he came out as gay after 30 years marriage and a long term affair with another man. I was in a state of shock throughout the divorce negotiation.

You got a Martin Order, not a Mesher Order.

Martin Orders are incredibly rare and only apply where the other party has sufficient capital to house themselves somewhere else without need of the equity AND the beneficiary of the order has insufficient time to work and accrue their own capital.