Mortgage interest

My ex will be getting all the equity from the sale of the matrimonial home and can buy another house out right.

I have to mortgage to the maximum of my ability, this is going to be over a long period which will accumulate a lot of interest.

Should the mortgage interest be added to the balance sheet? This could be 10's of thousands over the next 20 years and I will be significantly worse off.

For context there are other inaccessible assets such as pension and investments which could be used to offset this.

No you won’t be allowed to do that.

Would you want to factor in 20 years of your new house increasing in value or 20 years of pay rises?

This is an interesting question.

What you are describing is a situation where one party's living costs are decreased by being mortgage free while the other's are increased because they need a mortgage.

This is often viewed as capitalised spousal maintenance. Instead of monthly payments there's a capital amount paid. One advantage is this doesn't impact benefits.

If your ex's need is for capital now and they cannot raise a mortgage, pensions etc are of no immediate use. They will be investing in an asset that can be utilised in future to fund retirement.
If you have a bigger income and can afford to pay a mortgage, longer term investments are more worthwhile for you.

Tha alternative would be a spousal maintenance arrangement and for your ex to take out a mortgage taking this into account. This is arguably a better option in some ways as it can be varied if circumstances change. The courts do though generally prefer a Clean Break or no spousal maintenance.

Hadenoughnow

My ex has limited income and no mortgage capacity so I am forced to compensate for this by taking out a huge mortgage over 25+ years (I am already in my late 40s).

I have to take all the risks associated with that borrowing and the interest whilst she has to pay the bills via spousal maintenance. We share the kids 50/50.

It seems reasonable to me to use that interest to offset the other investments. I will never pay this mortgage off and will have to move once the kids are 18 whilst she gains from the increasing value of the house which she owns outright.

SM, if appropriate could help her to obtain a mortgage and reduce your need for such a lot of borrowing. It may be term limited so she has to downsize when the children are older.
If she does have a greater than say 70% share of the equity, I would expect some offsetting against other assets. Depending on your respective incomes I imagine SM would not be part of the equation. You could pay voluntary CM which would not impact any benefits.

Hadenoughnow