Divorce and Mortgage

Divorce and Mortgage

Getting a divorce or separating from your partner can be an extremely stressful time and one that most of us don’t plan for as we hope we won’t experience it. As part of your divorce or separation, you will inevitably need to sort out your finances and it can be quite complicated if you have joint mortgage with your ex-partner. It is essential that you fully understand your options so that you can make an informed decision about how to move forward. We advise both parties to seek independent financial planning and tax advice to enable you the chance to review all mortgage arrangements available and consider all options. This will help to ensure the most favourable outcome is achieved.

How does Divorce or separation affect my mortgage?

If you’re in the midst of a divorce and both you and your ex-partner’s name are on the mortgage, both parties are accountable for paying the mortgage until a financial agreement is settled. This is true, even if one of you has moved out of the family home and decided to live elsewhere.

When couples jointly take on a mortgage, they both commit to sharing the debt responsibility until it’s completely cleared, regardless of whether or not they are living in the property.

Missing payments can harm your credit score and that of your ex-partner’s. In severe cases, it could even lead to the property being repossessed which means you could lose your home. You should also be wary of pressuring your ex-spouse into shouldering more of the mortgage burden, as this could be a disadvantage in future financial negotiations that may come with your divorce or separation.

What do I need to do with my mortgage during divorce?

If separation is on the horizon, it’s crucial to notify your mortgage lender as soon as possible, especially if keeping up with payments might be challenging. Lenders often show understanding to couples undergoing a divorce or separation, potentially granting a temporary payment break to alleviate immediate financial pressures. This can give you some breathing during the initial separation phase.

Nevertheless, the original mortgage agreement will still be in place, and a long-term solution will need to be reached.

As soon as you know you are getting divorced, you should also talk to your solicitor. If you are moving out of the family home, you may be able to have your name removed from the mortgage, but you need to be sure this won’t result in you losing out on your share of the property. If your ex-partner is moving out and wants their name removed from the mortgage, you’ll need to be able to keep up with the repayments on your own.

What options may I have for my mortgage if I get divorce?

Unfortunately, ending a marriage when you have an existing joint mortgage isn’t straightforward, but it’s a situation that many face on a daily basis. There are generally three options to be considered in the hope of finding a peaceful resolution.

Option 1 – Sell the Property

When separating, you have the option to sell the property and move into alternative accommodation. Selling up would enable you to settle your mortgage balance and split any remaining equity between you. How you split the equity could be agreed amicably between you but you would need to seek legal advice if you cannot reach an agreement.

It’s worth noting that when selling a home, you will need to consider potential fees involved. These fees include:

Solicitor fees – as with buying home, you also need to instruct a conveyancing solicitor when selling a home. The costs will differ depending on how much the solicitor charges for their work so you’ll need to contact a solicitor directly for quotes.

Estate Agent Fees – If you chose to use an Estate Agent to help you sell your home, you may also need to pay for their services.

Early Repayment Charges – If you need to come out of your mortgage deal early in order to sell your home, you may face Early Repayment Charges. You can find our whether or not these will apply to you buy contacting your mortgage provider directly.

These fees are often swallowed up by the equity in your property and may need accounting for when working out your settlement figure.

Option 2 – Carry on jointly paying for your mortgage

If one party wishes to remain in the home, jointly managing the existing mortgage might be feasible, especially if it’s nearing full repayment and post-divorce relations remain amicable.

If you have children you may wish to remain jointly on the mortgage to ensure stability for them. If this is the case, you might need to establish a Mesher Order (often referred to as an ‘order for deferred sale’ through legal channels. This order would specify conditions like a predetermined timeframe or event, such as when the children reach a certain age, before the property can be sold and the proceeds divided between both parties.

Before committing to this route, it’s essential to ensure that both individuals can sustainably manage the mortgage payments along with other living expenses.

It’s also important to note that staying on your mortgage and NOT living in the property could potentially impact further mortgage applications if you later decide to buy yourself a new home. Lenders would view you staying on the mortgage as a ‘Committed Expenditure’ and therefore reduce your borrowing potential for a further property.

Option 3 – Buying out your ex-partner by keeping the property and transferring ownership

Another option would be for just one of you to keep the home and transfer sole ownership to the occupier by completing what is known as ‘A Transfer of Equity’. In this case, the lender has no obligation to remove either of you from the mortgage and they will want to ensure that the mortgage is affordable based on one income. This means you will need to meet the lender criteria and pass their usual affordability assessments.

If the lender agrees that the mortgage is affordable in your sole name, you can then remortgage, buying out your partner’s equity share in the property. Once the remortgage is completed, your ex’s name will be removed from the title deeds of the property and they will receive the money for their share in the property.

How do I go about applying for the mortgage in my sole name?

You have the option of approaching your current lender or remortgaging to a new one. Either way, you would apply for the mortgage in the same you way you would any remortgage.

Your solicitor will register all new mortgage details with the Land Registry to ensure all the property’s ownership records are up-to-date.