If I own a large house with ancillary buildings which generate rent with no mortgage in my sole name, can I release some of the equity in the house and give my ex-husband the money to buy himself a nice house?
I generate income from my job and rentals but I’ve missed payments for utilities and local property tax sporadically over the split-up time. Everything is paid up to date now. I’ve no savings, my tax affairs are sorted but I desperately need to move on with my life.
I am living in Airbnbs and on people's sofas every weekend for the past year as my ex comes to the home to be with the children. It's miserable for me. My ex makes a good income but rents a room in a house, saying he has nowhere to bring the children.
The house sustains the children and if we sell it, the children and I will have very very little income and the children would be devastated.
Banks all tell me different things, I’m scared of vulture funds and I just don’t know what is for the best. I know it’s a first-world problem and I should be grateful, but we are all so unhappy being stuck. Is there a way we can keep the main house and get another without the mortgage repayments being crazy – if I could even get a mortgage. I’m 49 and part-time self-employed.
Ms A O’N, email
It sounds like life is becoming a little overwhelming but I'm not sure equity release is going to provide an answer for you. More importantly, I'm not sure you should be shouldering this as your problem.
There are a few different ways to release equity in your home. The most common approach is simply to remortgage the property to gain access to funds. A mortgage is generally the lowest cost loan you can secure but it is still a loan and you need to be in a position to meet the repayments.
Given that your income comes from a part-time self-employed role and rent, and that you have a spotty credit record, I can see you having issues getting a mortgage. People in a lot stronger position are being turned down by the banks who are not simply risk-averse right not but downright risk-phobic.
However, you are far from the first person who has struggled to keep up with bills as they go through the trauma of a marriage break-up. You say your financial affairs are now in order with all payments up to date. Assuming there were no credit issues before the break-up, it should be possible to address the credit issues in any mortgage application.
If you do want to pursue a mortgage, I would suggest going through a broker who would be better versed in how to present a case with: irregular income, a less than blue-chip credit rating and tell you which mortgage provider to approach in that scenario – but I still have strong doubts that it will succeed.
There are two other, more formal equity release products in the Irish market but they are both designed for older people.
One is a lifetime loan provided by Spry Finance/Seniors Money which entered the Irish market at the beginning of the year. It allows you to borrow a percentage of the value of your home – the percentage you can borrow rises with your age. You pay nothing on the loan during your lifetime, but the interest – which is higher than you would pay on a normal mortgage – rolls up and the whole sum is repayable when you die.
But that debt can grow faster than you would expect, possibly consuming the entire value of your home when you are dead and leaving nothing for your estate.
Residential reversion
The other formal equity release model is something called residential reversion. Where you still own your property under a lifetime loan, under reversion you are actually selling a stake in the property. And because the lender, in this case a group called Home Plus, is not going to get access to the property for a while they will only give you a fraction of the true value of the property.
The company chief executive recently gave an example of a couple aged 67 and 70 looking to release 25 per cent of the value of their home. To do so, his company would take ownership of 72 per cent of the property. These are regulated products and the companies are up front about the cost but, in reality, this should be borrowers of last resort for people.
In any case, you won’t qualify for a few years. While some equity release products in other markets are open to people from the age of 50, the two operating in Ireland require you to be older – at least 60 years of age for the lifetime loan and 55 for residential reversion. And the younger you are, the worse value you will get from these lenders.
The final option is to sell part of the property to a family member or friend. But there’s nothing like a dispute over an illiquid asset to test a friendship or family relations, so you would both need to be very clear about the commitments made, and ensure there is comprehensive and legally watertight arrangement governing what should happen if either party wants to exit the arrangement.
His problem
But that brings me to the bigger issue: why is this your problem? Clearly, I don’t have access to whatever legal or other formal agreement exists between you and your ex-husband but your letter suggest that you are putting yourself out because he cannot or will not make arrangements to accommodate his time with the children.
You say he has a good income. These things are always relative and it may be the case that he will not qualify for a mortgage on a home anywhere near enough to the children to be able to have them over regularly but it is his choice to settle for renting a room in this other house. He knows that doing so automatically rules out having his children over. That, to me, appears to be his problem.
It does not seem reasonable that you are in a position where you cannot stay in your own house while he exercises his rights of access to the children. That you are forced to find a friend’s couch or an Airbnb every weekend seems entirely unreasonable and I cannot see a family court considering that a reasonable approach to visitation.
I am only going on your letter, but the division of financial assets seems to be that you got the family home and there is no mention of maintenance. That being the arrangement, the idea that you should either have to sell that property or otherwise mortgage it to fund a house purchase by him seems daft.
Clearly, if you cannot be in the same house as him, relations are very fragile so approaching your husband to suggest he put in place more realistic arrangement may prove counterproductive. In that case, I think you really will need to consider consulting a solicitor to see if a better structure can be put in place to allow your ex-husband see the children without imposing such an unreasonable situation on you.
