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iPaper - Couples arguing over cheap mortgages

ended 20. June 2023

A journalist on the iPaper is looking into an article about divorcing couples arguing over who gets to keep the cheap mortgage rate on the family home. ie I've heard of a couple where the man is moving out but he wants to port the 1.8% mortgage over (both names are on the mortgage), forcing his ex-wife who is staying in the home to get a new mortgage.
She would love to hear if you have had any clients also arguing about who keeps the cheap mortgage (it used to be other types of valuable assets that couples would argue over, now it seems sub-2% mortgages are also highly prized?!).
Would also like to know from mortgage brokers/IFAs how you resolve this (who keeps the mortgage? How can it be split? what factors need to be considered?), and if you think this is a growing area and an issue that more and more couples will fight over as interest rates rise.
 


 

5 responses from the Newspage community

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Darryl Dhoffer
Founder at The Mortgage Geezer
Yet to have one of these land on my desk , but i would imagine could be a tricky one to sort out - if solicitors for both parties are good, then settlement figures will be based on who benefits and who is out of pocket, based on a "ported" sub 2% interest rate and distribute equity accordingly - the spanner in the works will be if the divorcing or seperated couple, have dependents ?? Not an easy one to sort out on this basis at all...good luck
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Jamie Elvin
Director at Strive Mortgages
A compromise could be reached by calculating the costs saved by the person opting for the lower mortgage rate on the ported product over the remaining fixed period. This amount can then potentially be subtracted from their equity share. On the other hand, the party assuming the more expensive mortgage can use the lump sum to offset the increased payments. It's important to note that consent from both parties is required to port, highlighting the significance of compromise for the benefit of everyone involved.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
We've been involved in several cases like this and it's generally something the solicitors would factor in. Even if one party moving out of the family home wanted to port the mortgage to another property, and the other party agreed, they may not meet the affordability requirements of the lender when it's based solely on their income. Both parties of the divorce need to get advice on their borrowing capacity to properly understand what their options are. Let's not forget that although they may have a cheap mortgage rate now, this isn't permanent and whoever gets to keep it will also be on current market rates when they come to remortgage, so there's only a temporary benefit.
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Chris Sykes
Technical Director and Senior Mortgage Adviser at Private Finance
I recently have also seen an example of this, the client's solicitors actually worked it into their divorce agreement and worked out the monetary gain one had over the other, over the remaining fixed rate period within the mortgage so that it was made right either way. This will most definitely be a more and more common occurrence, especially amongst those that took longer term fixed rates (5, 10, 15 year fixes) as the monetary difference can be tens if not hundreds of thousands in interest costs
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Gary Bush
Financial Adviser at MortgageShop.com
This is a very real thing with divorced couples and comes up quite a lot when suitably qualified advisers are arranging a Capacity Report for one of the warring parties for the family courts. I think it highlights that sadly the UK having been the global leader in mortgage advancements for the 80's & 90's is now falling behind with what facilities are needed in 2023. What should happen automatically for these cases is that the lender "should" take a view and divide the current mortgage balance in two and then allow each party the same existing rate on their half of a new mortgage with them on their respective new properties. Applicants could also agree to buy the other party out of their competitive portion of the rate which could then form a part of the divorce proceedings. It's clear we will continue pushing the envelope with UK lenders to get them to understand today's problems that applicants have to overcome.