In the many years I've been your host in the Sun's "mortgage matters," I have tried to keep my focus, and not get involved beyond doing my job.  This case was an exception.  I would succeed for my client!

Charles and his wife own a home in the south end of the city.  He works in the publishing business, while she works daycare out of the house.  His wife, Elaine, has cared for their two children, and babysits three other toddlers on a full time basis.   Her father gave them $100,000 to put as a down payment some six years ago.   Charles pays for the mortgage and taxes with his $60,000 salary, while Elaine must pay for heat, light, phone, groceries, insurance, etc. out of her income.  Charles came home six weeks ago and announced to his wife that he wanted a divorce, and she could leave the house right now. "You can't afford the mortgage (balance of $78,000 at 6.55% amortized over eight years with monthly payments of $1100) on top of the other stuff you're paying, so I'll take over.  You just walk away." Elaine,  fearing the loss of her husband of seven years, her job, her equity in the home, wanted to fight back.  The house, her children and her daycare were now needed more than ever to solidify her own self-esteem.  She went to talk to her dad, who in turn went to the bank that held the mortgage and pleaded to allow Elaine to take over the mortgage.   The bank agreed to let Elaine take over the mortgage provided Charles was willing to go, and that dad would sign on instead of Charles.  Dad agreed.

Elaine went straight to her lawyer who put it down on paper, which she presented to Charles.  He was quite surprised that Elaine had done that much work and that she had the spunk to stand up for herself.  "What about my share of the equity in the house?" said Charles.  You want me out, it'll cost you $60,000 (which represented half of the down payment, and half the increase in market value over the last six years).  She was caught aback. The mortgage and another $60,000., she could not afford that.  She said to him that it was her dad's $100,000 that got them the house and the increase in market value.  Had it not been for her father, they never would have owned a home.  Without owning this home, the increase in market value never would have been theirs. "How about if you just walk away?" she said to him with disgust.  He was adamant.  Pay him $60,000 or leave. She went back to her dad, who called me for a consultation.  Ideally, they would like for Elaine to borrow enough money to take over the mortgage and pay off Charles, but it had to be affordable.   Dad was willing to sign but his pension income of $32000 a year would not qualify for the extra $60,000.  Dad lives alone in an apartment paying $800/mo in rent.

The house was conservatively appraised at $230000.  They had discussed this problem with their lawyer who had volunteered to arrange a second mortgage for the $60,000, but the rate of interest and the payments would have been too high. The amount of the first mortgage, coupled with the penalty to break the existing mortgage and the extra $60,000 plus legal fees and the like, would necessitate a new mortgage of around $145,000.   Based on normal ratios, even with her dad on board, they did not qualify.  Her credit was impeccable, and so was dad's.   I arranged a brand-new mortgage for the amount required, re-amortized the payments over 25 years, at a rate of 8.55% arriving at $1158 per month plus the taxes of $300 per month.  Dad decided to move into the house and continue to pay his $800 so Elaine's cost will be $658/mo, which she can afford.   She announced to Charles that it was he who was leaving the house, and that he would get his $60,000 and he would also get the divorce he was seeking.  He would need it for child support and alimony!

Since the loan to value ratio was so low (63%), and both parties had excellent credit ratings, we were able to find a bank to lend on that basis, even though the lending ratios don't fit.