Family unit
To determine whether or not mortgagors meet the exclusion threshold, both their income and their personal circumstances (whether they are disabled, dependent, ill, …) and those of their family members must be taken into account.
The family unit is made up of:
- the mortgagor
- the (not legally separated) spouse or registered partner
- the children, irrespective of their age, who live in the family home, including those for whom the mortgagor is their legal guardian, guardian or foster patent
The Code will also apply to mortgagors over 60 years of age, even if they do not satisfy the conditions to be considered a family unit.
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If a couple is actually separated – but with no divorce or (legal) separation agreement – the partner who does not live in the family home must be included as a member of the family unit. And their income must be taken into account to calculate the exclusion threshold.
If the mortgagor’s grandchildren live in the family home they would not be included in the family unit, unless there is a formal fostering arrangement.
Nor would the mortgagor’s parents who live in the family home be considered part of the family unit. So their income (for instance, a pension) would not be taken into account to determine the exclusion threshold.
No persons registered as living in the dwelling but who are neither owners, co-debtors nor the mortgagor’s spouse, registered partner or children are included in the family unit.
In the event of divorce
If the mortgagors are divorced, in order for the Code of Good Practice to apply, each of them must meet the exclusion threshold, which will be determined by the income and circumstances of each co-debtor together with their respective family units.
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After marrying, Pedro and Ana took out a mortgage to purchase their family home. They had two children and subsequently divorced. Ana lives in the family home with the two children. Pedro lives nearby in a rented apartment.
Ana is having economic difficulties and asks the bank to apply the Code of Good Practice.
When considering the request, the bank first asks for documentation on each of the borrowers – Pedro and Ana – and their respective family units. Ana’s family unit is herself and the two children who live with her in the family home. Pedro’s family unit is himself.
The bank will apply the measures envisaged in the Code if both Ana and Pedro meet the exclusion threshold. However, if only one of them is, the “extraordinary difficulties” requirement will be understood not to be met.
The same applies if the mortgage borrowers are part of different family units, either with non-registered partners or other borrowers with whom they have no marital relationship, such as friends, business partners or other family members.
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Such an agreement affects the original homeowners and mortgagors.
But as it implies a shift from two borrowers to just one, it will only be valid with the bank if the bank has previously endorsed the agreement.
Without the express consent of the bank, for its purposes both ex-spouses are the mortgage borrowers and, as such, are liable for mortgage repayments. The bank may claim the debt from either of them.
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