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What are we each entitled to in our divorce settlement?

What does the law say about how to split the house, how to share pensions and other assets, and how much maintenance is payable.

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The four basic steps to reaching an agreement on divorce finances are: disclosure, getting advice, negotiating and implementing a Consent Order.

What is a Consent Order and why do we need one?

A Consent Order is a legally binding document that finalises a divorcing couple's agreement on property, pensions and other assets.


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Sell the house or take if further?

  • Daisy_May
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16 Oct 07 #4791 by Daisy_May
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Hi Sparky,
You were asking in your first message about your husband having a 'chargeback on the property'. I had a similar question for my solicitor and she explained it as follows:

Say you were able to sell the house and downsize - you could use any equity for the moment to rehouse (plus possibly take out a small mortgage which you could afford to pay) then certain events would trigger you having to pay your husband his cut.
These are:
1)Your child reaching the age of 18 or finishing full-time education
2)If you permanently co-habit or re-marry
3)If you were to die
4)Or if you voluntarily chose to sell

You will have to do the maths and work out the scenario that would work best for you and your baby and I would suggest that you negotiate amicably as far as possible and thus reduce the number of solicitors letters that will need to be sent back and forth as these costs will soon mount up.

I hope this helps in some way - sorry its not much but I do wish you luck

DM

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16 Oct 07 #4795 by SPARKY1
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Daisy May - many thanks for the advice on the chargeback, very helpful.

  • Monitor441
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18 Oct 07 #4897 by Monitor441
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Sparky.

I'm going to play devil's advocate here so you can see both sides of the financial story of chargeback

The charge back is a good way to keep a roof over your head at the start of your new life but it can cost you a lot of money at the end. Here is an example - the figures are made up

Your house is currently worth £100K

Your ex2b has a 20% charge on the gross value - so at todays value that is £20K. This is always expressed as a % so if the value of the house goes up so does the amount he gets and if the value of the house goes down so does the amount he gets

The equity is £70K (of which £20K is you ex2bs) and you have a £30K mortgage. On your earnings, you get an 18 year mortgage and pay it off as you daughter turns 18

You don't have to buy him out until your child is 18, so 18 years it is, as you don't cohabit or remarry. (You can also chose to buy him out at anytime if you want to)

After 18 years the housing market has gone up by 15% per annum and your house is now worth over £1m. You still have to pay him 20% which is now £200K.

How do you pay him? You have to sell your house and give him the £200K and buy a smaller house.

In the meantime, your ex2b has gone and got back on the housing ladder (without any equity) and managed to get a house for the same price as yours with a 95% mortgage so he owes £95K. He has an interest only mortgage for 18 years and his house is now worth £1m with a £95K mortgage. You give him £200k so he pays off his mortgage, stays in the house he owns and has £105K to spend on what he wants, where as you have to downsize to pay him out

There are two other downsides.

1. When you spend money to improve the house, he will benefit even though he is not contributing, as the value of the house goes up.
2. He still has some control over you as he will have a financial interest in your property.

The upside of a charge back is just about to happen. The housing market is forecast to decline (I hope so, as my ex2b is in your position and I'm in rented but would like to buy). You can buy out your ex2b from his charge on the house at anytime as long as it is reasonable. So if you wait for the property market to drop and the house is now only worth £80K - 20% of this is £16K so you only have to give him £16K.

I hope this helps as it is a minefield

Good luck

M441

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19 Oct 07 #4904 by Daisy_May
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Monitor,
Perhaps you can shed some light on a situation that may arise for me. I may have to sell my house and use the equity to rehouse in a smaller property but in doing so pay off the existing joint mortgage. If the equity is not quite enough to buy a place and I take out a small mortgage on my own to cover the shortfall do I have to still pay my husband a % of the value of the house or is the mortage amount somehow deducted from the final divvy up when the youngest is 18? I was thinking that I would take the new mortgage out just in my name and that he would not contribute to its repayment but would his child maintenance be looked at as his contribution to my mortgage payments?
As you can see from my earlier response to Sparky, I am only at the beginning of this chargeback minefield which is why my advice was limited. But the more I look into it the more confused I become. Also, what happens if the house I decide to buy costs less than the equity I have available to spend, say for instance if I decide to move out of the area to a place where housing is much cheaper? Hope you can shed some light on my 'what ifs' - there are plenty more where those came from!!

DM

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19 Oct 07 #4905 by Daisy_May
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Monitor,
Perhaps you can shed some light on a situation that may arise for me. I may have to sell my house and use the equity to rehouse in a smaller property but in doing so pay off the existing joint mortgage. If the equity is not quite enough to buy a place and I take out a small mortgage on my own to cover the shortfall do I have to still pay my husband a % of the value of the house or is the mortage amount somehow deducted from the final divvy up when the youngest is 18? I was thinking that I would take the new mortgage out just in my name and that he would not contribute to its repayment but would his child maintenance be looked at as his contribution to my mortgage payments?
As you can see from my earlier response to Sparky, I am only at the beginning of this chargeback minefield which is why my advice was limited. But the more I look into it the more confused I become. Also, what happens if the house I decide to buy costs less than the equity I have available to spend, say for instance if I decide to move out of the area to a place where housing is much cheaper? Hope you can shed some light on my 'what ifs' - there are plenty more where those came from!!

DM

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19 Oct 07 #4911 by Monitor441
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DM

The easiest way to understand your problem is to give some figures -
value of current house,
current mortgage,
percentage split of equity between you and ex2b
cost of new house,
how much mortgage you can afford for new house.

Post these and I will give my opinion

M441

  • OBEs 1 canoodly
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19 Oct 07 #4913 by OBEs 1 canoodly
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Monitor!!

Excuse me but I think you have missed a point here!!!

This man, regardless of who's fault it is that the marriage has broken down, has actually been very reasonable in offering a 70/30 split in her favour AND when that was turned down he went on to offer ALL the equity!!!

If this woman choses to turn all of that down because she wants to remain in the former home with her child, then fine, there is no problem with that but then the tables turn as he will then have to move out and find a roof over his head and all the extra expense that will cost on top of the fact that he will have to maintain his child and his former wife and home presumably and again, that is fine and most courts would agree to that.

However, so what if he retains an interest in his former home by way of charge at whatever percentage?? He deserves to and would be entitled to it because he made a very reasonable offer in the beginning which was turned down. Therefore, if he comes out with 16k, 20k now or 200k then, it's actually the same because by the time his former home is worth a million they will still be in the same position financially because all other properties would have increased in line with inflation so your financial advice does not equate!!!

By the way, most men find it just as difficult to get on the property ladder after divorce as women regardless of income. Also, you haven't considered the tax implications for him if he did manage to get back on the property ladder with another property because by having a charge over his former home as well he will no doubt be liable to Capital Gains Tax (which doesn't come cheap!)

So, I feel these two should sit down and work out what is best for them NOW without someone like YOU putting the cat amongst the pidgeons (are you a solicitor or a banker? I mean that in the nicest possible way!!). With all the best will in the world and all your financial workings out, whatever they choose to do and whenever they choose to do it, neither of them will make substantial gains as you suggest!!

Oh, and by the way, the property market is set for a huge crash, so buyer beware!!

SPARKY, whats wrong with a housing association? You could be very happy because you wouldn't have the worry of maintaining the property and you could put your 70% of the money he pays you into high interest accounts working for you (notice "accounts" in the plural because if any more banks crash you will only be able to claim back 35k from each account under the government scheme) Spread your money around making sure that one of the accounts is a good ISA (tax free on interest paid - government scheme). We are the only country in Europe that make a big thing about property ownership and getting ourselves into debt. Renting can be ok too and at the moment its probably safer than buying if, as I suggested earlier you make any money you receive work for you in other ways as there are many other than purchasing property!

There it is. Had my say......the rest is your call but trust me do not get into an arguing situation that leads to solicitors and court because that will most definitely lead to a depletion of funds!!!!!

It's people that become devils advocate in your life during divorce that could end up helping you to make wrong decisions. Your ex has given you two very good offers......if it were me I would take either of them, run to the hills and move on with my life, there's a fantastic world out there waiting to embrace you!!!!!

May the luck always be with you

OBE's 1

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