Wednesday, August 28, 2013
Family Lore Clinic: I have a charge on my house from a court order, does my exes mortage company have a 2nd charge?
It is a common arrangement in a divorce settlement that the former matrimonial home is transferred to one party, with the other party being given a charge over the property for their share, the charge not being enforceable until some future date, for example when the children have finished their education.
Obviously, the party to whom the property is transferred may still have had to take out a mortgage on the property, for example to pay off any mortgage that was already existing on the property prior to the transfer. How does that mortgage work with the charge given to the other party?
The answer is that the mortgage company will probably not have a second charge, it will have a first charge. This means that their charge will rank first in priority to the other party's charge, so that if the property were sold, their charge would be paid off first.
If there is sufficient equity in the property to cover both charges, then having a second charge is not necessarily a problem. However, if the equity is not sufficient, then the person with the second charge may find that if the property is sold (for example because the owning party defaults on the mortgage), there is not enough money left from the sale proceeds to pay their charge.
As usual, if you require more detailed or specific advice regarding this matter, you should consult a specialist family lawyer.