Hi Bronte
I don't really agree with this at all.
In Peabody's circumstances I agree with you, as they cannot afford the debt, which only came to light after your post. So depending on the circumstances one has to decide what to do.
Whether married or not Peabody is not responsible for her partners BTL mortgage. But whether one is responsible or not it can have bad repercussions for both parties if one doesn't make the right choices.
Scenario 1.
Peabody could afford to subsidise the BTL, then in a stable family situation it is better to pay down the BTL so that any equity being built up in the family home can not be touched by the bank. Take the ultimate scenario where they jointly owned the family home with zero mortgage and house was worth 2 times the BTL. With both parties having equal shares. In that scenario the bank would come knocking for his share and ultimately family home would be sold, she would get her half but would no longer have a home.
You can be sure that the banks will show no mercy if there is a lot of equity in the family home that is available to the banks should Mr. Peabody have a large BTL mortgage that goes unpaid.
Scenario 2.
Peabody cannot afford to subsidise the BTL, then it is better that her partner builds no equity whatsoever in the family home. She should in fact pay all the mortgage and he should pay zero, in an effort to demonstrate that the house belongs to her. This is quite tricky.
People always assume that the family home is always an equal 50/50. But this is not so. Court judgements as far as I know time and again have judged that whoever pays the mortgages is entitled to the equity based on what is put in by that person. It gets more complicated in family home situations but that is the way it is interpreted by judges. Even more complicated is the fact that if one pays for the mortgage and the other pays utilities and groceries, the person paying the utilities and groceries will be judged to also be contributing to the household and ergo the mortgage. The only thing that is not equal to money in this scenario is for example a mother who looks after children at home, that has a zero monetary amount as per Irish courts.
Going forward, it would be best if the bank let Mr. P sell the BTL and they write down his NE. The more he demonstrates he cannot afford it and the more he shows he owns nothing, the more likely a bank will do a deal.
I have no crystal ball, but would a bank try to enforce a court to decide that he had equity in the family home if say he didn't directly contribute towards the mortgage from his salary. The banks are not exactly flavour of the month with the courts, I would like to be the bankers barrister advising them on this likelyhood of this untested area.
If Mr. P was really smart, he'd be putting some of his salary in a hidden account for the rainy day. That is the ultimate logic of scanario 2 where a bank will not deal with the BTL problem. And hopefully with the regulator jumping up and down yesterday about banks not dealing with the problems maybe Mr & Ms P will be able to move on. But I wouldn't count on it.
And watch out for the sneaky stuff the banks are at now, telling people in Peabody's situation that she is responsible for Mr. P's debt, not true. Whether married or not. They won't write that down, but they'll certainly lie it straight to your face.
