Advice: how do I afford to give H the equity in the house?!

[runningmom]

Quickly:
Amicable split this week after 20 years marriage and 2 kids.
House worth £300k and about £200k in equity which my H will want half of at some point do he can start again with his life.
How on earth do I release 100k from the house as I’d then have a 200k mortgage which I wouldn’t be able to afford. I earn about 40k a year; my H less.
Am I better off selling so we both release equity and trying to rehome me and kids in something cheaper?
This is all new to me and I can’t afford to pay solicitors/mortgage brokers straight away. I’m coping ok; until I think how the hell I'm going to cope on one income when we struggled on two 😞
Any advice welcome.

Welll you only really have 3 options

take out a mortgage to cover it ( seems unlikely based on your earnings)

sell the house and work out what you can buy with 100k deposit plus a mortgage

try to defer the sale until a later date using. Mesher order - however this is unlikely to be awarded if your children are very young, he is not able to adequately house himself by doing so, and ultimately you’ll still be in this predicament in years to come only then you’ll be older and less mortgage years so these are not often the good option

it’s hard op and there are no easy options

Thank you. I think I knew the answer would be this. I’d like to keep the house on but not sure I can if I have to release the equity (how can anyone afford to?!)
I have about 5 years til youngest is 18 but then I’ll be in my 50s.
it seems unfair to make my H wait that long to be able to start over and buy a place (he’d have to live with elderly parents) but the thought of selling the house is sad and i guess the realisation that I might have to have a smaller less attractive house in a less nice area is starting to hit home and that’s cra** for me and the kids 😞 but guess that’s the price to pay.

OP go to a broker and see what they can do re: mortgage. They may give it to you - or something nearabouts that your husband might be happy with.

Speak to a lawyer. It doesn’t always need to be 50/50 of the equity. If your housing needs are greater than his (ie if kids will be with you full time?) or you could negotiate on another area (pensions?) then it might be possible to buy him out for a lower amount that you could get a mortgage on.

You can't afford NOT to get legal advice when it comes to keeping the marital home. Beg, borrow, or steal the money.

My cousin (we're in the US) was able to keep the house and NOT buy her exH out as her 'share' of his pension was basically the same as she would have had to pay him to buy him out of the house. So she signed off on his pension, he signed off on the house. Would that be a possibility?

As PP say, it’s not just the equity in the house, it’s other assets of the marriage too, so pensions is the biggie. Depends if you also have equal pensions too- baby women have much less than men due to maternity & caring/childcare/PT working, so negotiating on equity split vs pension pot is useful, but if you’re also equally matched in this then it’s not so helpful.

Don't forget pensions. If your husband has a higher pension than you then you might be able to come to an arrangement where you release say £60k to enable him to buy somewhere and release your claim on his pension so you keep more of the house equity. You should get a mortgage of £160k on a £40k income.

You need to look at the joint total of all your assets regardless of who owns them (there are potentially exceptions to that but it’s a reasonable starting point).

Major assets are usually house and pensions but any savings also count. You may be able to offset house against pensions though they can’t be compared like for like as pension is not immediately accessible.

50/50 split is often a reasonable starting point but not inevitable. If you’re amicable you have some flexibility to agree a different arrangement.

It does sound like you may have to sell though as it would probably be difficult to afford the house on your own. The divorce process is slow so you have a bit of time to get your head round it. I know it can be really difficult thing to come to terms with.

Increasing your income even slightly would probably make it viable to raise a £200k mortgage if that’s a possibility (probably easier said than done). You’d save a lot in moving costs if you could stay. Some banks take into account child maintenance when considering affordability.

@runningmom never give up a share of pension for a bit of a house that you cannot afford. Big mistake.

Are you able to do overtime to bring up your wage? They looked at my last 3 months payslips so if you could do that you should be able to borrow more.

Thats if you know you can afford it plus bills on your normal wage.

Thanks: I feel like my pension will be better (I’m a teacher) so not sure about it all. Starting to panic a bit now.

You need to do more than feel though. Facts and figures. Divorce certainly makes everyone poorer.

I can’t really top up my pay (I’m a teacher) and tbh not sure I can afford the mortgage on my own now I’m thinking about it but a £200,000 house round here will be in a rougher area/very small. It’s a compromise that seems ok for me but tough on the kids.

Some people come to an arrangement where the house is sold when the children reach an appropriate age such as 18. Or you sell it now and split the equity. Unfortunately divorce does affect finances in an adverse way even if amicable. What does your H suggest?

You're right I'm afraid. Unless you go for the mesher order that is the price to pay of becoming two households. I'd agree it with your ex while he is still amicable

If you can’t afford to live in the property you are in, easily with two incomes - then how would that work out with just one income?

hiw many bedrooms do you have? Could you take a permanent lodger? With this you can rent a room for £7k per year and not pay tax on that income. That’s £583 a month extra you could have coming in. Obviously there would be some small increases in utilities and you’d not qualify for 75% council tax.

its the one way of getting an approximate £9k pay increase

you could sell property & take £100k and put down on another property, increase mortgage and length. Look for a new property with high insulation to reduce bills and lower council tax bills, to make your income spread further

Will he be paying you child maintenance when you divorce? Some lenders will include this as income and it can make a big difference in what you can afford to borrow.

I would imagine so. It’s very early days (only decided to split earlier this week), so we’ve said we need to take a few days to emote before we talk practicalities fir the next few weeks then months then longer term.
Im not even sure how much child maintenance is she can’t seem to navigate internet to get a rough estimate. I really could do with a one stop shop to sit down with someone and sort it all….solicitor? Citizens advice?

These websites might help:

If you plug your salary etc in here, you’ll be able to work out if you’re entitled to any benefits:
https://www.entitledto.co.uk/

If you put his details in here, you’ll be able to work out suggested CMS:
https://www.gov.uk/calculate-child-maintenance

What arrangement will you have re the kids?

Would she be happy to tell you their income so you can go through the website? How often does she anticipate the kids will stay with her and with you? Are you aiming for 50/50?

As a clean break is preferred in divorce these days, don’t try to cling on to the house if it’s not doable (get legal advice first of course.) Look at it as a fresh start. Both exh and I wanted to keep the house but neither of us could afford to buy each other out. I massively downsized with the kids and it was not the end of the world. Also financially, it was the right decision as over the last year I have not had the massive energy and maintenance bills which I would have had in my previous place.

"Keeping the pension" might be a less attractive option to the OP's ex now that interest rates have started to increase (and unlikely to apply too, if he is the lower earner). The reason being the cost of not having cash immediately accessible now has become a lot more expensive than it was a couple of years ago.

For example, for someone who needs an extra £100k mortgage now, their housing costs are going to be around £4k higher than they would have been just two year's ago.

If I was divorcing now and my ex-wife had suggested she take £100k in home equity, I would have insisted on at least £140k of the pension as the equivalent because it's not just the face value that matters but also the cost and the risk of not having immediate access to that asset.

If the family home is to remain the children's primary home and you the primary carer then you may be able to negotiate a 60/40 split for example.

Or if it is genuinely amicable. I'd question whether you need to divorce immediately. And could just separate. Does he have to buy straight away? Of course that would be first choice. But could he rent for 12-24 months and allow everyone a transition period.

He may struggle to buy anyway if he is paying child maintenance if the children are mainly staying with you.

But, like others if the home is not affordable now, how would you manage it alone? And although at this moment it feels terrifying a fresh start and your own front door might turn out to be a good thing. There comes a point post separation where they waltz around the family home like they still live there and it grates. They can't do that if you move.

Maybe the question could be, is there a way we can do this so the kids can stay put until they go to uni?

But then again, id crack on with moves pre gcses if they are inevitable.

Thank you. We aren’t thinking divorce. It’s early days. He earns less than me and couldn’t rent and afford to pay half the mortgage whilst I stayed with the kids.
Theres 200k equity in the property and we owe 100k on mortgage. I earn about 40k if that helps.
I know I need to seek professional advice tbh. Even if he took less equity eg 70k I’d still have a 170k mortgage which I’m thinking I wouldn’t afford in my own??