- You need to make a list of assets and liabilities, (including super, vehicles, businesses, loans and debts) and subtract liabilities from assets to work out what is your Net Asset Pool (NAP).
2. If the house is the major asset, you need to know what the equity is: current value minus outstanding mortgage amount = equity.
3. Work out what each of you will get from the division of the NAP, considering the financial and non-financial contributions and future needs of each of the parties. The longer you’ve been together, then more likely this is to be closer to 50/50. Alternatively, a short relationship with no children would more likely be split according to each party’s financial contributions.
4. Work out if you can afford to buy them out and get a mortgage on your own.
Let’s look at a simplified example.
Sue and John have a car each, valued at $5,000 and $20,000 respectively. She has $10,000 in super. He has $100,000 in super. They have a house they bought together 10 years ago for $600,000 now valued at $1,000,000 with a $500,000 mortgage on it, giving equity of $500,000. The NAP is $5,000 + $20,000 + $500,000 + $10,000 + $100,000 = $635,000
They decide to go 50/50 in the division of the NAP, so each get 50% of $635,000 which is $317,500 each.
If they each keep the vehicle they’re driving, then the division might look like this:
Sue keeps her car worth $5,000, $45,000 of John’s super (so both have half of the combined amount), leaving her being owed $267,500 to make up 50% of the NAP
John keeps his car worth $20,000, $55,000 of his super, leaving him being owed $242,500 to make up 50% of the NAP
If John wants to keep the house, he will need to pay Sue $267,500 and take responsibility for paying back the $500,000 mortgage.
If Sue wants to keep the house, she will need to pay John $242,500 and take responsibility for paying back the $500,000 mortgage.
Sue would need to increase the mortgage from $500,000 to $742,500 to pay out John and keep the house. John would need to increase the mortgage to $767,500 to pay out Sue and keep the house. (This is assuming they have no other way to pay out the other party.)
Here’s the Four Step process of dividing the matrimonial property pool:
- Add up the assets, subtract the liabilities to get the Net Asset Pool
- Consider the financial and non-financial contributions of each of the parties
- Consider the future needs of each of the parties
- Negotiate a “just and equitable” division between you as a percentage then as a dollar amount then as items in the asset list.
Confusing? It can be. Ask Tess to help you get to agreement in mediation.
