Myself and my spouse are separated and trying to divorce. He has agreed to me taking over the mortgage if the bank is willing to remove him as a lender. We need to get approval in principle prior to the divorce, as we will be drawing up the divorce based on this happening.
Initially, I was told that this wasn’t possible and I banged my head against a lot of doors before being told that actually approval in principle, prior to divorce, was possible.
However, in the interim we moved from mediation to solicitors, and my spouse has been advised by his solicitor not to sign the “removal of borrower” form from the bank – but the bank needs him to sign this before they will assess my application.
The solicitor has not given any reasoning, except to suggest (incorrectly) that I could deal with the bank without this – but they have their procedures and stick to them.
My spouse of course is disinclined to go against his solicitor, so now suggests I instead approach another lender for a new mortgage. I have talked to two brokers and both were very negative although they each thought that possibly if I approached the institutions myself I might have more luck.
The issue is we have two small children, aged nine and six, and I am approaching 50 and with a salary of approximately €50,000 in the public service.
I also receive Working Family Payment, which is a means-tested Social Welfare payment – which one broker told me is an automatic no. I could manage without the payment (ie not apply for renewal when that comes up next year) if that’s essential to getting a mortgage, though it would be totally contrary to actual financial soundness to do so.
Both myself and my spouse are astonished by how difficult it is to find out what the standard means of dealing with one spouse taking over the mortgage singly is in a situation like this.
But I can see why the removal of borrower form is worrying him, as it’s not clear that he’d have to sign something else afterwards to confirm.
Is there actually a standard procedure or any particular bank that looks favourably on someone in my position? Our existing bank is Bank of Ireland. The amount of the mortgage is only about €120,000 so I feel I am a very safe bet, but most financial institutions seem to really dislike the combination of young children and advanced borrower age.
J.G.
Sometimes it can seem like the world is resolutely set against us, most especially when we are already under stress and even the most basic information seems impossible to tie down.
Clearly, getting divorced is one of those times, especially where there are children involved.
The good news is that both you and your husband seem to be on the same side of this particular discussion. You both agree that you will take on the mortgage and ownership of the family home as part of any eventual settlement. It is simply a case of organising the mechanics of the arrangement.
[ What happens to your family home in a divorce?Opens in new window ]
The fact that the process has moved from mediation to solicitors certainly doesn’t make things any easier as that almost inevitably introduces an certain adversarial dimension to things. This is not to criticise solicitors on either side. It is their job to do the best they can by their client but it can make everything more formal and even the simplest of discussions and agreements can get bogged down in minutiae.
The kernel of your problem over the mortgage loan and the house is that the mortgage is a legal contract with three parties – you, your husband and the bank.
And the removal of borrower form is a formal application to revise that contract. So, it is not surprising that his solicitor would not want him to sign that document except as part of a comprehensive final financial settlement. And having hired a solicitor, I can certainly see the sense of your husband choosing not to go against their advice.
And for its part, the bank will also tread very carefully.
But let’s back up a bit here.
You want to get approval in principle that the bank will be happy for you to assume control of the loan.
That makes sense. If the bank is not happy to accept you as the sole mortgagee on this property, there is no point in giving you sole control of it in the financial settlement as the bank will simply refuse to sanction the arrangement and you will both find yourselves locked into the mortgage on this home as each of you tries to move on with your lives.
Of course, approval in principle is precisely what it says – “in principle”. It is not an absolute confirmation that it is happy that you can take on this financial burden ... but it is the best you are going to get at this stage.
Importantly, as regards your husband and his solicitor, it is not the same as a formal removal of borrower.
The Bank of Ireland assures me that, “pending legal agreement, one party can apply for a ‘House Hunter’ approval in principle from Bank of Ireland which gives a reliable estimate of their maximum borrowing potential from the bank”.
This is not always the case. Brokers tell me that some lenders will require the consent of both lenders to assess one of them for affordability, which seems a bit 1950s to me but there you go. Fortunately, Bank of Ireland does not appear to be one of those.
So, certainly for Bank of Ireland and the approval in principle, it appears you can do it by yourself as your husband’s solicitor suggests.
You need to approach their mortgage team to get this and they will be looking for certain paperwork. This can change slightly from bank to bank but, in general, it will include your passport or driving licence and proof of address and proof of employment and income. That will involve a number of recent payslips and evidence of your employment status – most likely a formal salary certificate form that your employer will have to fill in giving details of your position and both current and recent salary.
They’ll also want to see six months of bank statements for any account you hold and, if applicable, credit cards and details of any other income or borrowings to get a sense of your spending patterns. They need to be reassured that you have the capacity to make your monthly repayments.
This is what you were initially seeking and it should be fairly straightforward as long as you have your paperwork together.
Banks are inherently cautious organisations, more especially after manners were put on them after the financial crash. And much though they would beg to differ, I must say I agree with the view you have developed that an older borrower and/or young children sets off alarm bells in most institutions. The two together will, I suspect, make them even more cautious.
However, those are precisely the sort of factors they take into account when addressing approval in principle so whatever figure comes out of that will be their determination of what you can repay over the shorter working lifetime available to you than to most borrowers and the increased financial strain on you in raising two children.
One broker says that most lenders will discount €250 a month per child as the cost of raising them, but factors such as private schooling, if relevant, will clearly affect this.
This is where we get to a bit of a chicken and egg situation. You want approval in principle so you can frame the divorce settlement but the bank will very likely want to see at least the outline of what the proposed divorce settlement will look like, including any intended financial support from your husband for the children.
All you can do if this is sought is get your solicitor to set down the best assessment of what the settlement should look like.
This is one area where approval in principle might differ from the amount eventually sanctioned. Ultimately, it will depend on the precise financial terms in the final divorce settlement.
Having spoken to people in the broker sector about your salary, job, age, amount outstanding on the mortgage and the children, they seemed confident that you should be able to get approval in financial terms to take over the loan, even proving your ability to pay against an two percentage point increase in interest rates.
[ How much does a divorce in Ireland cost?Opens in new window ]
I did not raise the Working Family Payment issue. I can certainly understand the view that banks will be more wary when income relies on welfare payments but I agree that it seems nonsensical to actively reduce your household income for assessment when applying for a mortgage. The people I spoke to seemed comfortable that your salary on its own should qualify you for a loan of this size.
Of course, they do not have any details of the formal valuation of your home and any substantive issues there may be with it. Nor do we have any understanding of whether a final divorce settlement might involve you paying a sum to buy your husband out of the home etc, but certainly they seemed to suggest that, in pure financial terms, this should be doable.
I should say at this point that I am surprised at the position of the two brokers you spoke to – both their negativity which is not reflected among the industry professionals I spoke to and, even more oddly, their view that you might be better approaching lenders yourself.
If brokers are to have value, it is their understanding of what different lenders like and do not like. If they feel they have less chance of securing you a result than you will by going solo to the bank, they are effectively talking themselves out of business.
In my experience, brokers come into their own in terms of their value precisely when the situation of the borrower is slightly outside the norm – which yours is, notwithstanding that more than 300,000 people in Ireland are now either separated or divorced.
Removal of Borrower
As we said at the outset, your mortgage loan is a contract so, at some point, it will come back to the legal side of things. That’s where we come to the “Removal of Borrower” form. This is a formal request by the mortgageholders to the bank to remove a borrower from the mortgage and from the title to the property on which that mortgage is secured.
Before the bank even considers the request – and it is a request, no more, which means they have the power to refuse it – it will need to be sure that there are no outstanding arrears and that your longer-term payment history is good. Bank of Ireland clarifies that this means payments on the mortgage cannot have been overdue for longer than 30 days in the last 12 months.
The form will also expressly ask whether you are paying your husband, or being paid, to remove his name from the mortgage.
It also needs to be signed by you and your husband. The bank will not countenance such a move without the consent of both sides.
[ Divorced homebuyers: ‘Gamechanging’ rule changes make it easier to buy a new homeOpens in new window ]
It is really important to understand that, as part of the process, you are actually taking out an entirely new mortgage at current rates. Along with the Removal of Borrower form, the bank will send you a mortgage application form that you will need to complete.
And among the documents the form says will likely be required, is a copy of your separation agreement/divorce court order certified by a solicitor. Assume you will need this.
The Bank of Ireland Removal of Borrower form also states: “If we agree to remove a borrower, you and your solicitor must agree to our additional requirements. We will let you know these by writing to you or your solicitor.”
I asked what these might be and the bank said that, typically, they would be things like execution of a deed of transfer to be lodged in the Land Registry regarding your sole ownership of the property, confirmation of any buyout payment being made, and of changes to life or home insurance policies.
So, yes, the Removal of Borrower form will be required – and solicitors for both sides will certainly be required to engage at that stage as it is legal document – but not until the final divorce settlement is in place. Of course, that settlement will need to make provision for what happens if the bank refuses the request.
I think your best first move is to approach Bank of Ireland for approval in principle and proceed to finalise the divorce settlement before getting the necessary signatures on the Removal of Borrower form.
If that does not work out, then you are looking at alternative lenders but I suspect your best first approach is to your existing lender who knows you and your finances.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice
