Options after Separation

N

nvegom

New Member
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6
Hi all,

I'm in my very 50's, married but separated (not legally) for approx 4.5 years.
My Ex is living in the Family home with one dependent (15yo).
I am currently living with a relative, but I need to find a home for myself.

Assets
  • Family Home Value approx €400K. Jointly Owned/Mortgaged by Myself/Ex.
  • Outstanding Mortgage €240K, approx 17 years remaining
  • I have a Pension pot of Approx €300K
  • I have savings of €30K
Earnings and commitments
  • My Earnings are €120K pa gross.
  • I pay the full mortgage €1600pm
  • I pay child maintenance (not court ordered) of €675 (district court maximum plus a bit) per month and also half of extra curricular/school costs.
  • I pay health insurance to cover all parties, also Local Property Tax, also Home and Life Insurances.

  • I don't know what my Ex's income is currently last I know she was working part-time earning €25K, if she worked full time then double that I guess, she has earned at this level this in the past.
  • She pays for Utility Bills. Electricity/Heating Oil.

I am considering the following..

Offering her the option to buy me out of the mortgage for the outstanding amount (€240K) and then sign the house + all my equity over to her.
Obviously assuming she can earn more and secure a 90% mortgage (€216K).

In parallel I use both savings (€30K) and lump sum tax free amount from my pension (c. €70K) to pull together a decent deposit to allow me to buy another (modest) property for myself in the region of €200K - €250K, LTV would be good, repayments relatively low.

I know this is very loosely framed above but I just wanted to get some input on this as an approach that would feed into an amicable Separation/Divorce agreement.

Key questions I have are - can I sign House plus equity over to my Ex (should she be able to secure a mortgage) without Tax repercussions?
Is it ok to dip into a Pension pot in order to support the purchase of my own home in these circumstances?
 
nvegom said:
Offering her the option to buy me out of the mortgage for the outstanding amount (€240K) and then sign the house + all my equity over to her.
Obviously assuming she can earn more and secure a 90% mortgage (€216K).
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You don’t say what your wife’s age is but hard to see her getting a €216k mortgage on even a €50k income.

Does she have other assets or potential for a loan?
 
Dr Strangelove said:
You don’t say what your wife’s age is but hard to see her getting a €216k mortgage on even a €50k income.

Does she have other assets or potential for a loan?
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Hi,

Apologies, she is in her mid-40's.

She has a pension of her own, value circa €50K. Other than that I don't know.

My thinking is that the offer to buy the house out for the remaining Mortgage amount might give her some impodice to do what's needed to own the place herself outright. She loves the house and wants to stay there..

Going by Mortgage calculators earning €50K would see her eligible for a €200K Loan, I'm factoring in the time it will take to actually agree and sort this out. could be 1-1.5 years away. I will still be paying mortgage in the interim and reducing the principle.
 
Your pension pot is €300K and your wife's is €50K so presumably she could get half of the combined amount in a divorce (€175k). So essentially €125K of your pension should be hers. If I was in her shoes I would not accept your offer as she would be coming out with less than half of the assets so would get more if it went to a judicial decision in divorce proceedings (typical 50%/50% split of all assets). Also note that pensions adjustment orders can only be ruled on in divorces and not in legal separations so I would recommend you both look into finalising via a divorce.

Total assets of couple = House(€400K-€240K) + Pension €300k + Pension €50K + Savings €30K = €540K. In a 50%/50% split your wife would get €270K. You seem to be offering her only €210K in total (€160K of house equity + her pension €50K).

You dont say where your pension pot resides. If its an occupational DC pension you can only draw down on it after you leave your employment with that company. If its a PRSA if I recall correctly then you can only draw down on it after 60.
 
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€216k mortgage over 20 years at 3.5% is €1,250 a month. Add in life and home insurance say €1,350 a month.

It would be close to 40% of her net income.

Not sure if lenders can consider court-ordered maintenance but it looks like quite a stretch financially for her.
 
If she wants to keep the house she needs to earn more money. Is that realistic or reasonable to suggest
 

I am considering offering her an the option to buy the family home, an asset currently worth €400K for nearly half that amount. So that's €100K of My Equity that I would 'gift' to her. I would also consider gifting her the deposit of € 24K she would need as 10%, also like I said the principle on the mortgage should be further reduced by the time this might actually all happen

So..
  • She ideally buys the family home, gets all the Equity.. so that is a €400K Property with say a €200K Mortgage, Her equity = €200K
  • I hopefully buy a house for myself for say €250K, I take out a €150K mortgage (Deposit of 100K from Pension & Savings), My Equity = €100K
So at that point she is €124K (equity + gifted Deposit) to the good. We both have a home each, I cant touch her €100k

Factor in Pension, now a €230k pot, because I dipped into it.
Also My €30k savings are gone, as they were part of my €100K deposit.

What might happen at this point in the context of divorce?

Like I said I'm looking to move towards getting both of us housed, sooner rather than later. I'd prefer not to wait another 9 years if my Dependent goes to 3rd level up to the age of 23 to then look at selling the house with a view to buying a home each from the proceeds. Would prefer to be able to move on with my life before that. If she really wants to stay in the family home then she might need to crank things up in terms of earning capacity, our dependent is not a young child anymore. They Will be 18 in 3 years...

To answer your question - Yes, I can draw 25% out of this pension now. No issue. However Its best left for a year to draw it down, otherwise I pay a hefty penalty.

Also could somebody clarify... is all of My Pension pot up for consideration here??.. The vast Majority of my pension Pot was amassed before we were Married (it was a defined Benefit pension). or Does that matter when it comes to Marriage & Divorce?
 
nvegom said:
Also could somebody clarify... is all of My Pension pot up for consideration here??.. The vast Majority of my pension Pot was amassed before we were Married (it was a defined Benefit pension). or Does that matter when it comes to Marriage & Divorce?
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No - it doesn't matter a jot. In Ireland all assets brought into the marriage are treated as marital assets unless farmland/business. In my case the house worth €750K was in my sole name and paid in full before the marriage but still considered as a jointly owned asset 50/50. Irish law favours the dependant spouse. You need to adjust your expectations as what you are proposing will not be the outcome under Irish law. Trust me, I feel for you, but I've been through the process so speaking from personal experience. BTW your child maintenance is very generous. €500 per child is the max I've seen for people earning more than you. In my own case it was €500 per child (3 children) + private school / university fees + health insurance plus spousal maintenance. Assets including all pensions/property/investments/cash split 50/50 regardless of whether they were aquired pre or post marriage.
 
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Just to add to this, this is why it's usually better to come to some sort of agreement through negotiation whether that be mediation or simply horse trading between the respective legal representatives (on the basis of client instructions obviously) rather than taking a gamble on what a court/judge may unilaterally decide (and they generally don't want to be put in that position anyway). But sometimes that's easier said than done. (I'm speaking from experience with judicial separation and more recently the eventual divorce here).
 
@Dr Strangelove I am thinking more like €200k over 20 years when the time comes. If she wants the house she'll need to earn more, she is capable of that.

Also she might look at rent a room scheme.. Nice house with space.. only 2 people in it..

Also our current lender considered her as earning sufficiently to support repayments on the current joint mortgage of €260k at the time, jointly and severally liable and all that..?? So she must have satisfied some stress testing...? LTV was higher in that instance too.



DeeKie said:
If she wants to keep the house she needs to earn more money. Is that realistic or reasonable to suggest
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@DeeKie yes it is a reasonable suggestion. No reason why not..



@Flybytheseat Ok that's rough.. thanks for the input based on your own experiences. But what specifically would not fly under Irish law.. ? I asked the question about pension Pots that were amassed pre-marriage because I did not know what the law states.

I'm giving my Ex the option to buy the family home outright, and gift her my equity and help her a bit more financially in the process. I would need to dip into my Pension to buy my own home.. a bit of give and take on each side, all fully transparent. There would still be a pot for dividing on Judgement Day and there may be maintenance?

Am I wrong to consider buying a home for myself before a Divorce? Is that another can of Asset worms?
Like I said I'm in my early 50's and the clock is ticking.. one lender said the longest they would consider a mortgage for me is 17 years.

Also regarding maintenance, duly noted about the amount I'm paying being generous. Would that, coupled with the fact I am paying the full mortgage (incl. my Ex's half) be deemed excessively generous.. considering that whilst the house is an Asset, I am funding her part of that asset, plus I do not have the benefit of the use of the family home??



@ClubMan yes totally agree, would be hoping to thrash something through negotiation rather than let it all hang on a decision in a courtroom on a day.
 
nvegom said:
I am thinking more like €200k over 20 years when the time comes. If she wants the house she'll need to earn more, she is capable of that.
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Maybe she has a job where she can at her own discretion double her hours worked and earnings. But it's not so simple in most occupations.

nvegom said:
Also she might look at rent a room scheme.. Nice house with space.. only 2 people in it..
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I don't think any lender or judge would rely on this as being sustainable. Also - do you want your child growing up in a house with a succession of strangers in the spare room?

Well you were earning something like 80% of your household income so hers was hardly relevant!

The best thing in all of this situation is your own very high income. It will allow you to borrow a lot more than her even though you are older. I think the ultimate solution will mean you borrowing to the max as well.
 
Maybe she could get a new Job? My point was if she needs to earn more she has the skills/experience to land a suitable Higher Paying Job.

Fine, rent a room not considered by lenders.

A Succession of Strangers...? Lots of People including families I know rent a room to bring in more income, i'm sure they are glad of the extra income and vet the people they rent to. My Child is 15 and well used to having, for example, Students around the house, I suppose they are strangers initially. Besides I'm thinking now as a longer term source of income, not specifically for the purpose of securing a mortgage.

Her income was very relevant at the time we drew down the Mortgage. I never said how long ago that was or what the earning split was.
Maybe I increased my earnings.. and she did the opposite?

Anyway, as I said I need to house myself very soon.. the Max I could borrow now with the existing Mortgage left in place is €110K, but this was without bringing personal loan and Maintenance into the equation. So I would need to work on clearing that loan first. Couple that with €70k Lump Sum from Pension and €30k savings and I could stretch to purchasing a small property in the €200-€250k bracket, but it would not be in a high housing pressure area and would require more travel for me.

That would leave me with combined Monthly Mortgage payments of Approx of €2,700 which is 45% of my net Salary of €6,000 before living costs etc are factored in.

When I add in my Projected Monthly costs for Living expenses, I am left with €800 a month for anything else that might crop up. This is without me looking to reduce maintenance payments or indeed asking my Ex to contribute anything to the Mortgage.

I calculate that the Mortgage Principal on the Family Home will reduce by approx €11k per year, by the time my Child is 23 (If in FT Education) the mortgage balance would be around €150k and we would be out of our 10 year Fixed Mortgage Term. So perhaps she could take on the mortgage at that point or sell to free up the €250k equity assuming house prices remain stable and buy somewhere outright, I would still transfer my 50% Equity to her.

Could something like this be baked into a Divorce agreement?
 
It is not unheard of for family homes to be divided. You could live in one half and your wife in the other. Your child could have a choice. If you are in your fifties? Is your wife the same age? If so it is not so easy to retrain.
Maybe remortgage and buy another property. Then when your divorce is completed split the assets.
 
Hi, many thanks for they reply.

Splitting the house in 2, with each of us living in one half is not an option unfortunately.

Remortgaging not an option for me either.. I want to get off the existing mortgage if at all possible. Plus I'm heading for 5 years being separated, so really not willing approach a remortgage application with my estranged Ex.

Worst case the existing mortgage is left as-is for the time being and I try and get a seperate mortgage by myself for my own home.
Then we go through with a divorce and then the specific equity split in terms of house/pension is dealt with when my Child is no longer a dependent.
 
nvegom said:
I want to get off the existing mortgage if at all possible.
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You cannot "get off" a mortgage. Your wife has to pay off the existing one with a new mortgage as if she was buying the property fresh and on her current income she simply won't get a €240k mortgage, not even if she doubled her income.

I think there is a solution as part of an overall settlement where:
  1. You use €70k lump sum to pay down the mortgage to €170k
  2. You agree something like a 50/50 split of mortgage payments until your child is 23 or no longer in full-time education.
  3. At that point the divorce agreement would state that the house has to be sold and proceeds split along negotiated lines
This leaves you with your €30k savings today and free to borrow more to get your own place. You would have to borrow the absolute max, potentially from family even.

Once your child is no longer in full-time education your wife might be in a better position to buy you out (the mortgage will be a lot lower) and you can use the proceeds yourself to trade up.

PS: I know the personal side of all of this is gruelling and a lot of negative emotions. Advice here is purely on the financial side.
 
OP, you can do nothing without a formal separation or divorce in terms of buying a home for yourself.

You have a €400k house with a €240k mortgage. Your equity is €70k, if your ex is buying you out with a €200k mortgage (which she might just barely get on €50k income) you would first need to pay down tge mortgage by €40k. Unless the house is sold you're extracting zero equity from it.

You can't touch your pension until you actually retire.

I'd talk to a lender about getting a mortgage based on your €30k savings. Because that's essentially what you're looking at as a deposit. It'll be tough, but doable.

But you need to get a separation/divorce in place first because you're not going to be able to do anything without that formalised first.

Best case (for you) scenario is the former family home is sold and both of you get to start over with decent deposits. Your income is high enough and your wife is young enough to achieve this.

Second best is you get to walk away from the outstanding mortgage. This looks unlikely based on the info you've provided- your ex can't afford to pay the mortgage even if she could take it over officially.

Ireland is not a country where you want to be renting privately in retirement, all the more so when your pension pot is not exactly massive. And renting in retirement is currently where you're headed.

Get a mediated separation agreement first ideally then go to court for a divorce. If you're both reasonable lawyers aren't required.
 
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