Dear Money Mentor
I was married to a dairy farmer for five years before we decided to separate. We have no children. We have been apart for more than five years now and I live in an investment property we owned jointly, in our local town.
We have no formal legal agreement in place and we are not legally separated yet. My ex-husband owned the farm and I always had my own job. While we were married we lived in the farmhouse (except for one year), which has no mortgage.
The property I live in is in joint names and has a mortgage. We lived in it ourselves for the first year of our marriage while the farmhouse was being renovated.
We both repaid the mortgage until I moved into the property. I have made the repayments of €950 per month since then, without ever missing a payment.
The mortgage was over a 25 year term, there is 14 years remaining. Originally we borrowed €180,000 (90% of the cost price). Besides from the property, the bank took extra security of farmland, which was owned by my ex-husband.
My ex-husband would like to regularise matters. He needs the land that is held as security for the mortgage to be released from the bank.
He would like me to register the property in my sole name and take over the mortgage, as he does not want to continue to be responsible for this loan (even though he has not helped with repayments for the past five years).
In the proposed settlement, I am being offered a lump sum and this property. The outstanding mortgage is now €128,000, on a variable interest rate of 4% with an Irish bank.
If I agree to the settlement, I will need to re-mortgage now, as the lump sum settlement will be paid to me over four years so I will not be in a position to repay the mortgage immediately.
I am not a high income earner, so trying to get a mortgage by myself I fear will prove difficult. Due to the settlement I will have sufficient money to repay the mortgage in full over the next three/four years, but my ex-husband wants his land released from the bank now.
Any advice would be welcome.
Thank you for your email. I trust you are availing of independent legal advice in agreeing your settlement, separate from your ex-husband’s solicitor.
It is important that you are properly advised in family law matters before you agree to any settlement.
According to the most recent Property Price Guide 2022, residential properties in your area have increased by 10-15% in 2021, so it is likely the value of the property is at least €230,000 or more, which means your Loan to value (LTV) will be 55%, or lower.
This will allow you avail of a much better interest rate, as the lower the LTV, the lower the interest rate (if and when you get mortgage approval).
Your current interest rate of 4% is uncompetitive, but a variable rate provides flexibility so you can easily switch lenders.
You should re-negotiate that interest rate with your current bank, even if you never move. A fixed interest rate will be cheaper, but due to your current situation, moving to a fixed rate might not be timely, as you could incur a penalty if you wished to switch.
Your ex-husband needs his land released from the bank as security, but you don’t state why or perhaps you haven’t been told. Your original mortgage of €180,000, with outstanding balance of €128,000 and no repayments missed, is strong evidence of your good credit rating, which will be important when you are applying for the new mortgage.
A mortgage broker would be helpful to assist you with getting this mortgage approval.
Some of the new lenders in the mortgage market have the keenest interest rates, such as Avant Money, ICS Mortgages, and Finance Ireland. With a LTV of 51% to 60%,
Avant offers an interest rate of 1.95% over three, four, five or seven years. ICS Mortgages offers the same rate over three or five years.
Generally the mainstream banks are not as competitive, but will offer discount rates for higher value mortgages.
Banks are never eager to remove a name from a joint mortgage unless the mortgage is cleared in full, so you will either have to come up with the outstanding balance or your ex-husband will need to give you the full lump sum now, and not over four years.
Can he get a loan to make this happen? I strongly advise you to get independent professional legal advice before agreeing to any settlement.
All the best, Margaret.