Housing needs equalisation

[Nimbus1999]

I’m so confused! How does court make a decision on housing needs? If for example (just made up numbers!):

Husband
50% equity £100,000
Mortgage Capacity £300,000

Wife
50% equity £100,00
Mortgage capacity £200,000

And £400,000 is enough to buy a house.

Would a judge give the wife an extra £50,000 so both the husband and the wife have £350,000 each? Even if not enough for either to buy a house? Is that how it would work?

Do they add up equity plus total mortgage capacity x 50% per person?

This is totally excluding other assets like pensions for now.

Help!

They look at the whole picture not just the equity in the home.

What's the actual problem you have? You're obviously trying to negotiate but can't agree - what have you offered him so far?

There is not enough equity for us both to buy.

He potentially has a much higher mortgage capacity than me.

He has a business asset that I don’t have.

There are no other assets (excluding pensions).

Housing needs are the same.

Can I argue for more equity because he has a greater mortgage capacity plus liquid stock from business.

So in the example, he would have £50,000 less equity and I would have £50,000 more so our overall pots are the same?

It really is about establishing borrowing capacity. This is going to require formal disclosures on income. He runs his own business so I don’t think it will be easy to establish his mortgage capacity. You will have to wait and see what he produces and it may not show he can borrow at c300k. Then you have a new set of arguments about income maximisation and reduced outgoings.

I know this is something you want settled but other than framing you own needs as being 200k of equity which is 100% then there isn’t much you can do until disclosure and valuations.

I’ve had all the disclosures and he put his business value as nil. I sought legal advice and they said you can argue that his mortgage capacity should be based on his earning potential - he is capable of having a full time job earning income but has chosen to not work or have any income.

Are you being accurate about the housing need.

The court won't try to maintain your current standard of housing, simply provide sufficient. So for example if you needed a home for you and two dds, a two bed house where the daughters share might be considered adequate.

Or a less salubrious part of town. Or a longer walk to school.

So he doesn’t have bigger mortgage capacity, he just could if he did a different job? Is f that the same for you?

You still won't have enough for a house, do you just want to make sure he can't afford a house so you are equal?

I’m just trying to understand how it works.

I’m working full time and have maximised my earning capacity. We have 4 children so I had many years of working part-time looking after the kids. He continued to work full time the whole time with no childcare responsibilities.

I am trying to downsize from a 6 bedroom detached house to a 3 bedroom terraced/semi house so I don’t think I’m being excessive.

I just didn’t understand if not enough for a house each, do they just split equity 50/50 or do they factor in that he does have a higher earning capacity than me (if he got a job).

I’m just don’t understand exactly how it works.

A Mortgage Capacity Report gives an assessment of each spouse’s ability to afford a mortgage. The report takes into account each spouse’s individual income, expenses, credit history, and debts, and can be used to guide decisions about how to divide assets and property. This can be requested/ordered.

In any case the other party will need to provide copies of the business accounts as part of financial disclosure upon divorce and evidence of income and tax. Look at 2.11 of Form E.

During divorce proceedings, a company is treated just like any other financial asset, which means that company shareholdings and profit are considered matrimonial assets and not just the income derived.

All of the assets are considered - business, stocks, shares, savings etc. pensions may be worth more than the former matrimonial home for example. Then Section 25 Factors are applied when negotiating the split of assets.

How does the business have nil value? Are there no premises, van, stock, tools, cash ...

Who has the pension/bigger pension.
If your ex has a bigger pension you could ask for more house equity to offset not claiming against the pension. With advice of course as pensions are valuable.

Look at the schedule of documents to accompany Form E - these are the documents needed to understand the value of assets upon divorce. You can ask for these in disclosure. It includes:
Income, tax assessment
Copies of business accounts fro the past 2 years
Estimate of the current value and how that figure was reached
Any documentation re the estimated value (letter from an accountant or a valuation)

Self employment is tricky to deal with.

Is it an acrimonious divorce ? Child maintenance is a percentage of his earnings and there are loopholes whereby self employed people can make it look like they earn drastically less so they pay minimal or no child support. Strangely these people supposedly earning tiny sums on paper end up getting credit cards and mortgages without problems.

How much are flats or 2 bedroom places?

His pension is 10 times mine.

I have his business accounts showing it is loss making.

He put no value on his Form E but I will dispute that as I know for a fact there is stock.

Hypothetically speaking though, if no pensions or other assets and purely the house equity, how would it be split? If housing needs the same? Would it always be 50/50 regardless of the fact he could have a much higher mortgage capacity than me (as he has worked in a professional role for 20+ years earning over £100,000) and I had career break to look after the children.

Are we really both in a completely equal position? Do I just have to suck it up?

If large pensions ensure you have CETVs for each and consider an actuary report - it can give capital value, incomes on retirement at 50/50 split or percentage of choice and factor in retirement ages.

https://www.battens.co.uk/insights/divorced-women-lose-out-on-ps5-billion-a-year-in-pension-payments

I have CETVs and the solicitor recommended an actuary report but that is proving difficult to obtain.

I think your create a bit of a head scratcher if you ask for the 150 to his 50. That is 75% equity. The problem isn’t so much the amount but the fact the house you need costs more than you can afford even with this amount. You will need to explain that.

In terms of arguing he can maximise his income to £100k+, he will have a counter argument. This one is easier if it is as simple as going full time. Presumably you will be stating his skills and experience mean he can earn more. That is certainly an acceptable argument. You just need to be primed for a counter argument. Try to find out as much as you can about his field and its job market.

I think the problem is the judge is going to be reluctant to leave someone without an income no capital. And you need all of the capital. But it is a case of you can but try.

They also are unlikely to leave one party with all the liquid assets and and the other with all the risk ( in maintaining salary /mortgage/pension etc)

I feel like just giving up but it seems so unfair. Not to mention he has racked up £40,000 debt that will have to be paid from matrimonial assets and blown a £80k redundancy. Me and the kids have scrimped and saved to pay the mortgage (he doesn’t), not get into debt etc. Think I’m just going to accept moving into a 2 bedroom rented flat (all I can afford) until all this is sorted. Such an upheaval for everyone though.

He is a qualified professional but choosing not to work in his field (although did for 20 years pre separation). I will illustrate suitable jobs and earning capacity for him (and mortgage capacity) but I know he won’t go back. His choice I guess and nobody can make him but his family will suffer because of it.

Can't you negotiate using the pension. So for example if his pension is valued at 200,000 and yours 20k you ask for all the house equity in return for not making a claim against his pension?

His pension will come into it.

Can you ask the mortgage lender to have a payment holiday.

Please don't give up your claim on the pension.