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Equity; post-marital separation - advice sought

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  • Equity; post-marital separation - advice sought

    I would very much appreciate some advice from you all about something that is currently causing me a great deal of stress - is it difficult to get a mortgage for a second home (not investment) when separating, and what would be the LVR applied?

    Background:
    My husband and I have a family home with a RV of 450K, with an outstanding mortgage of 175K

    We also own a (relatively new) rental property worth about 250K - there is next to no equity on this one, it was purchased at 100% loan using the equity in the family home - we're in CHC and fast capital gain is not a thing here

    We have recently decided to separate, and I will stay in the family home as I am the main carer for our son and this will minimise disruption.

    My husband does not want to go from homeowner to renter (and fair enough) and wants to purchase a property to live in. Given the criteria of 3 BDR in a an area close to the family home, he thinks he can get one around 400K.

    My question is whether we can easily use the equity in the family home to help fund this house. Will the bank lend to us at 20% deposit (taken out of the equity on the family home)? Or will they require him to remove his name from our family home (currently owned jointly) first?

    I don't even know if I'm asking the right questions!

    All advice and suggestions gratefully accepted.

  • #2
    Originally posted by TAG View Post
    I would very much appreciate some advice from you all about something that is currently causing me a great deal of stress - is it difficult to get a mortgage for a second home (not investment) when separating, and what would be the LVR applied?

    Background:
    My husband and I have a family home with a RV of 450K, with an outstanding mortgage of 175K

    We also own a (relatively new) rental property worth about 250K - there is next to no equity on this one, it was purchased at 100% loan using the equity in the family home - we're in CHC and fast capital gain is not a thing here

    We have recently decided to separate, and I will stay in the family home as I am the main carer for our son and this will minimise disruption.

    My husband does not want to go from homeowner to renter (and fair enough) and wants to purchase a property to live in. Given the criteria of 3 BDR in a an area close to the family home, he thinks he can get one around 400K.

    My question is whether we can easily use the equity in the family home to help fund this house. Will the bank lend to us at 20% deposit (taken out of the equity on the family home)? Or will they require him to remove his name from our family home (currently owned jointly) first?

    I don't even know if I'm asking the right questions!

    All advice and suggestions gratefully accepted.
    Refinance and buy him out or sell and split the equity. Keeping things mixed post divorce sounds like a disaster.

    Comment


    • #3
      So your current equity is $275K.

      20% equity on current family home = $90K
      40% equity in IP = $100K

      So you've 'used up' $190k of your equity on your current properties. That leaves $85K as a deposit for a new owner-occupied purchase. So you have enough equity to do it.

      Have you looked at servicing? As the properties will be under different ownership, the bank may well decide that you will need to refinance the existing home to withdraw equity, rather than borrowing against it. They will then look at your ability to service this new mortgage, and your husband's ability to service his new house.
      My blog. From personal experience.
      http://statehousinginnz.wordpress.com/

      Comment


      • #4
        I think you'll want to sell the IP and gift him equity from the house to make this work.
        Free online Property Investment Course from iFindProperty, a residential investment property agency.

        Comment


        • #5
          Thanks everyone.

          SidinNZ, servicing shouldn't really an issue, we're both on decent incomes.

          Jerk and NickG - I was trying to avoid selling anything.

          I don't want to sell our family home (at least for the short term) as I want to keep things as unchanged as possible for our son.
          And I was a bit dubious about the consequences of selling the investment property (it was only purchased about 8 months ago) from an IRD perspective. I'm also a little concerned that I may not get what I have spent on it already given the market has been rather slow.

          I guess I'll have to talk to the bank and see what options they can give me to avoid selling.

          Thanks a lot for your perspective/ help!

          Any opinions on whether he can still buy with a 20% deposit or will they need 40%? We are with Westpac if that makes a difference. Thanks!

          Comment


          • #6
            Hi TAG,

            Bank will ask for a separation agreement - this will need to be drafted by your respective solicitors. They are keen on these even when everything is amicable so they don't have to go back should the situation change in future.

            Solicitors are likely going to want registered valuations on both properties to define equity.

            Westpac are still lending up to 95% for owner occupiers so he should be fine if he's buying something to live in.

            Andrew
            Your Home Loan - Wellington Mortgage Broker
            [email protected]

            Comment


            • #7
              Assuming you can afford to I would buy him out and then he can go and do what he wants. So you work out what the current net position is, which seems to be maybe 275K. Pay him half of that by topping up mortgage and repaying the rest over time. This will give him enough cash to have a 20% deposit on another home for himself.

              Comment


              • #8
                If you want to stay in the house etc then a possibility is raising enough deposit (he only needs 20%) and then use this to buy the new one. The new one could be in his sole name and the deposit is deemed partial gift.
                www.ilender.co.nz
                Financial Paramedics

                Comment


                • #9
                  Thanks for that. I didn't want to spend money on solicitors and valuation if I didn't have to, so as Bob's your uncle and brokerman say (and Donna pointed out) - maybe the numbers will work out deposit wise for us. I'm seeing the bank Thursday so will post an update, thanks again for all your help!

                  Comment

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