Here’s one for people who’ve been through it.

My wife and I are getting an amicable divorce. The only two assets are my defined benefit pension and the family home, worth approx. £120k, with £60k still owing on the mortgage.

My wife is still living in the house with the kids and I’ve moved out. She wants to stay living in the house, and I want her to, as it gives her and the kids stability and security.

Neither of us have the cash to buy the other out of the house. She has no income other than benefits and what I give her, and is unlikely to have the income to get a mortgage any time soon.

Even if I had the cash to pay her her half of the equity, she doesn’t want a lump sum as this will affect her benefits (please don’t start about that – it’s her business not mine)

We currently have a joint stupidly cheap tracker mortgage which I’d be reluctant to give up – I’ll never get a mortgage this cheap again.

This is what I propose. What do you think?

1. She gets whatever proportion of my pension she is entitled to (probs half of the value accrued whilst we were married)

2. I get the house. By way of paying her her share of the equity, I do not charge her rent for a set period of time. [So for the sake of round figures, if I owed her £30000, and market rent was £500pm, I would let her live there rent free for 60 months]

3. Along with the house, I get all of the landlord’s responsibilities for upkeep (which she can’t afford anyway) and all asset/interest rate risks.

4. After the rent-free period is up, she pays me rent at market rate until such time as she wants to move.

5. I’ll sign something to say I won’t sell the house until the kids are both 21. Or something like that.

6. I want to keep our current mortgage, which is very cheap (but in joint names). I’m not sure I have a good enough credit rating to get such a favourable mortgage again.

Talk to me people.

Would you be looking to remove her from the mortgage? if so your income needs to be enough to take it on yourself. You don’t need much income to get a mortgage of 60k, if you have little debts?

It was a long time ago, but bitter experience would suggest that you should get her name removed from the mortgage as a start. I didn’t do it at the time and it cost me in the long run.

You need to talk to a someone who understands divorce law.

It’s all possible and because it is amicable shouldn’t be an issue but you are leaving yourself open to problems with point 6. If you are both on the mortgage then you will always appear on each others credit scores etc so if she goes mad with a credit card she can’t afford it will badly affect you. I’m not sure they would understand her paying you rent when she is on the mortgage either.

Speak to a mortgage company and if you can get the property solely in your name then do that and rent it back to her at an agreed rate but setup a proper tenancy agreement that covers all the stuff you have mentioned.

Would you be looking to remove her from the mortgage? if so you’re income needs to be enough to take it on yourself. You don’t need much income to get a mortgage of 60k, if you have little debts?

This is the thing. The ideal is that I quietly continue to pay our very cheap joint mortgage, yet (somehow?) legally take ownership of the property.

If push came to shove I could probably get a £60K BTL mortgage on my own but unlikely to get one tracking 0.75% over base rate!

Ideally, if you want the house to be ‘yours’, you need her off the deeds. You can only do this if you take her off the mortgage (and vice-versa)

You might, might, be able to take the mortgage on your own under the same terms. You’d need to speak to the lender, and you’d need a solicitor/conveyance to handle the deeds/land registry bit.

*edit* Just to be clear, legal ownership of a property is denoted by whose name is on the deeds. If it’s a joint mortgage, you both have to be on the deeds. Similarly, for a sole mortgage, there can only be one person on the deeds.

Speak to a mortgage company and if you can get the property solely in your name then do that and rent it back to her at an agreed rate but setup a proper tenancy agreement that covers all the stuff you have mentioned.

But surely that’ll mean the op will need a buy to let mortgage, so he’ll get humped with a highish interest rate.

And remember you will also need to pay tax on the earnings.

To take the other party’s name from the mortgage then you need to ask the lender if you can transfer the title into your name. Not sure if it is possible with all mortgages, but I did with mine. It cost about 1k including all the fees, land registration and solicitors bills.

I had to prove that I could afford to take it on, so had to go through all the appointments / mortgage checks that you go through for a new mortgage. A bit long winded, but worth it.

EDIT – Ah… hadn’t thought about it changing to a BTL…

Are you planning on buying a new house for yourself any time before your kids are 21? You’ll be setting yourself up for a nice bit of additional stamp duty if you are.

You might, might, be able to take the mortgage on your own under the same terms.

It was a long time ago (20 years-ish), and I guess it depends on your lender, but this is what I did when I split with a former partner who I’d bought a house with. There were solicitors/fees associated, but the mortgage stayed the same, albeit with her name removed.

Edit: Mine was about £1k too, and I hadn’t thought about the BTL implications for you either.

You could just take it into your own name (assuming you can, as above), pay the mortgage, and keep rent out of it. You’re not paying for her to live rent free, you’re paying for somewhere for your children to live.

This all sounds like it needs actual legal advice though

All excellent points made so far – thank you.

And remember you will also need to pay tax on the earnings.

Yes. Tax question. If I forgive her rent for 5 years (payback for her share of the equity) am I naïve in thinking there’s no tax to pay (no income to tax!)?

As long as you can show its been you paying the mortgage all along (as I was able to) it is just a case of paperwork shuffling and the costs involved.
Cost me circa £700 couple years ago but it was easy to show the above.

Doesn’t matter what the circumstances are you’ll be taxed on the earnings – minus costs, I don’t think HMRC will care about your arrangement. But I could be wrong.

Doesn’t matter what the circumstances are you’ll be taxed on the earnings – minus costs, I don’t think HMRC will care about your arrangement.

OK…so no rent coming my way = no tax?

Having been & still in a similar situation myself, we were told by the bank that we couldn’t remove my partners ex from the mortgage without taking out a new mortgage product which would result in the monthly repayments going up from about £700 a month to about £1200 a month – all down to the new affordability criteria. Luckily not much equity in the property & only a repayment mortgage so just view it is very low rent (about 50%) for what it is & leave it as it is even though it keeps the ties between her & her ex that we could do without.

IHN’s solution seems to be the simplest but def needs legal advice, good luck.

You’re not paying for her to live rent free, you’re paying for somewhere for your children to live.

I can and will do this in the short/medium term, but long term I don’t owe my soon-to-be-ex-wife a living and I can’t just buy her a house while I have none!

You could just take it into your own name (assuming you can, as above), pay the mortgage, and keep rent out of it.

Yep just had a good look at my credit record. I’m going to have a high credit score from Jan 2017 (negative data from 6 years ago dropping off). That gives me 6 months to pay the CC off. That will give me the best chance of meeting any affordability criteria for taking the mortgage on myself. No BTL mortgage needed for 5 years or so if she’s living there rent free. Can switch to BTL mortgage once I start charging her rent.

This is all assuming she agrees to the plan.

Thanks IHN (and everyone) for your thoughts.

Spend a few £ on a lawyer. Legal ownership and beneficial ownership are different you could both legally own the property on trust for the beneficial owner who is you . this would preserve your mortgage but entitle you to the full whack after mortgage when sold . I am not recommending this just saying it is possible. Honestly at this point a few £ on legal advice would be money well spent .

Spend a few £ on a lawyer. Legal ownership and beneficial ownership are different you could both legally own the property on trust for the beneficial owner who is you . this would preserve your mortgage but entitle you to the full whack after mortgage when sold . I am not recommending this just saying it is possible. Honestly at this point a few £ on legal advice would be money well spent .

Yes – thanks.

I will take legal advice – I just wanted to run my thoughts by the STW massive 🙂

You also need to be aware of what would be your landlord responsibilities of for example she didn’t look after the property will or how you would feel if she moved a new partner in. Everything is possible but it always look better whilst you believe neither of you would do anything ‘unacceptable’ but experience has a habit of confirming that’s a native expectation. In simple terms, eyes open to anything and everything, hope for the best but plan for the worst.

Speaking from previously having an ex in a house and still paying I can only give one piece of advice.
Buy her out, get her to move out and cut all ties apart from discussing kids stuff.
Trust me on this one, for your sanity do that. She will get a house if she gets benefits. Or she can use her share of the cash to get somewhere and possibly find a small job to cover her expenses.

You also need to be aware of what would be your landlord responsibilities of for example she didn’t look after the property will or how you would feel if she moved a new partner in. Everything is possible but it always look better whilst you believe neither of you would do anything ‘unacceptable’ but experience has a habit of confirming that’s a native expectation. In simple terms, eyes open to anything and everything, hope for the best but plan for the worst.

Yeah. She actually doesn’t look after the property very well. I do, to ensure the kids’ home is nice. But yes, very valid points. Thanks.

I think the pension asset has been ignored. Your total assets are 60K from the house and 30x whatever annual pension you are due now from your contributions accrued during your marriage (that will be a large sum for even modest pensions due to the risible annuity rate). Half of this total asset sum should be assigned to your wife.

It is not as simple as stating that she is due some fraction of your pension in years to come. In fact, in some cases, if you have accrued a reasonable pension already (say £3000 per annum), she’s probably in a position to claim entire ownership of the house in lieu of the claim on your pension repayments, which you would be required to provide for her.

Seek legal advice but keep it amicable in the event of hearing something you might not want to.

and 30x whatever annual pension you are due now from your contributions accrued during your marriage

Right. You have my attention. Please explain the 30x!

Also, how old are your kids? Yes, it’s a good idea to make sure that the kids you have have a roof over their heads until they’re adults, but can you afford to keep them in that house if you end up finding someone else and having more kids?

And what if she finds someone else? As above, are you happy for him to move into your house at your expense?

Defined benefit pensions are back-calculated to an equivalent pension pot (for defined contributions) at the annuity rate, which is currently about 30 to 1. Hence to buy a pension of £3000 needs a pension pot of about £90000.

Your accrued pension of £3000 to date (as an example : 10 years accruing at a rate of 1/80 final salary and earning £24K) therefore has a monetary value of £90000, which is what your wife would need to buy the same pension. This is the sum done to convert defined benefit pensions for the purposes of the Lifetime Tax Free Pension pot (limit of £1M sounds a lot doesn’t it?).

You can calculate your total assets (house $60K plus pension pot) from this and divide them in half. If your pension is worth £6000 per annum, your total worth is £240K and hence half would be the value of the house.

Defined pensions are very valuable things.

http://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/when-relationships-end

EDIT: the above is technically called “Pension offset”. Your wife is perfectly entitled to request it of she desires, rather than share your pension.

When I worked in conveyancing peeps did take out joint mortgages but then assign the property has 100% to one party.

It was an odd arrangement that First Direct (the lender we worked on behalf of) were happy with and people essentially did it to protect the asset in the event of (usually) the husband being declared bankrupt.

I have spoken to conveyancing lawyers since and they thought this was madness on the part of the lender as it removed a good deal of protection for them.

I can’t see the mortgage Co agreeing to it for this reason but a lawyer will be able to confirm.

Also, how old are your kids? Yes, it’s a good idea to make sure that the kids you have have a roof over their heads until they’re adults, but can you afford to keep them in that house if you end up finding someone else and having more kids?

And what if she finds someone else? As above, are you happy for him to move into your house at your expense?

1. I have someone else! I contribute my share of the bills but not the mortgage, as my girlfriend doesn’t want me to have any claim on her house if we split up. That arrangement suits me!

2. She doesn’t want kids and we’re bloody careful to ensure we don’t have any 😀

3. If my ex wife moved someone else in, it wouldn’t be at my expense. It would be up to her to charge him “keep” or not.

Defined pensions are very valuable things.

Thanks. Yep – and mine is worth quite a lot more than your example. However it presumably doesn’t automatically follow that she can demand the cash value in lieu of her “slice” of my pension.

Otherwise, I’d be paying her mortgage for another 14 years, forgoing any chance I have of owning a property myself, while I go out to work and she sits at home.

I’d be dressing as Batman and climbing Big Ben if that happened 😯

Thanks. Yep – and mine is worth quite a lot more than your example

I think you mean “ours” if she has not worked whilst bringing up children. Seek proper advice.

http://citywire.co.uk/money/what-happens-to-your-pension-when-you-divorce/a686727

Otherwise, I’d be paying her mortgage for another 14 years, forgoing any chance I have of owning a property myself, while I go out to work and she sits at home.

this is not an uncommon outcome, I believe.

OP, firstly best wishes – sadly I have first hand experience. Hopefully you can take this at face value (ie this thread has nothing to do with any others)

What you are proposing seems a very good deal for you. A court / mediator would insist your wife and kids have somewhere to live – probably the current home and paid for by you. The court would require your wife to maximise her income even if that meant just a part time job somehwere. IME a common settlement in your case would be for you to keep the pension and she gets the house with you paying the mortgage and an amount towards the bills. The common deal would say you can rent/buy (in time) a 1 bedroom. Your logic of “rent free” I haven’t heard of before and imo won’t stand up in a court/mediator.

this is not an uncommon outcome, I believe.

I agree with TiRed

Slight note on the pension is if it where split the wife would get slightly mode than half of the value as she is entitled to equal income and as she is a woman she will be expected to live longer.

So bottom line is of your wife accepts your proposal and wil sign such a settlement then fair play to you both. However I suspect if she gets any advice they say its not a good deal for her. Also at the end of 5 years the CSA may well have an interest as she’s on benefits and may well try and get more money out of you if you are no longer paying maintainence.

Again, best of luck

I’d be dressing as Batman and climbing Big Ben if that happened

I have considered this and I am terrified of heights

As mentioned, you need to make sure your wife doesn’t accrue an interest in the property. This would probably be done by ensuring that the house is let to her on an AST and would probably require at least a nominal rent. You mention benefits – would you not be able to have her housing benefit paid to you as the landlord? Would definitely run this all past a lawyer.

Jamba I appreciate the best wishes and you taking the time to type that out.

I would add for the record that I see any agreement as separate from the child maintenance, which I always pay and will continue to pay no matter what else happens.

My problem is that the child maintenance and the mortgage will take up a third of my monthly take-home. No chance of getting a deposit for my own place, and one bedroom is no good when I have two growing children coming to stay with me 3 nights a week. If my girlfriend ever gets fed up with me and kicks me out, I’ll be renting some rat hole. For ever.

Joyous thought 😀

Happy to try and help. You might want to pour a drink …

I think you’ll be paying more than a third of your income in support and maintainence. We live in one the most “wife friendly” countries for divorce in the world. Court logic will be your wife has “given up her career / opportunity for progress” and as such is entitled to a place to live and raise your kids and you to pay handsomely towards that. The court would probably take a view that you can save for a deposit some other time when you have had a promotion etc … In the meantime you can rent a 1 bedroom. A 45 year old family member of mine is living with his parents post his divorce to save for a deposit

Anyway, I don’t mean to be overly negative but you should be prepared mentally for a tough outcome. You do need to get some proper advice, if the ex will agree to mediation that is cost effective and based upon typical court imposed settlements

Happy to try and help. You might want to pour a drink …

I think you’ll be paying more than a third of your income in support and maintainence. We live in one the most “wife friendly” countries for divorce in the world. Court logic will be your wife has “given up her career / opportunity for progress” and as such is entitled to a place to live and raise your kids and you to pay handsomely towards that. The court would probably take a view that you can save for a deposit some other time when you have had a promotion etc … In the meantime you can rent a 1 bedroom. A 45 year old family member of mine is living with his parents post his divorce to save for a deposit

Anyway, I don’t mean to be overly negative but you should be prepared mentally for a tough outcome. You do need to get some proper advice, if the ex will agree to mediation that is cost effective and based upon typical court imposed settlements

I was debating whether to get a cheapie divorce “package” from a local solicitor firm, or pay quite a bit more for the local unpleasant rottweiler of a divorce solicitor and get some proper representation. I think I’m going with the second option.

And if it turns out in the end that I have to spend the rest of my life working for my ex-wife, having never achieved for myself the security and comfort I expected would follow the years of hard work at school, university and my chosen profession, then stuff it. I’ll ride my bike more, play with my kids, and occasionally have a little cry 😀