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Divorce and MortgageGetting 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.
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Do both owners have to agree to sell a home?
If you jointly own a property, you cannot sell it without their consent. Both people own the house equally and therefore you need mutual agreement in order to sell.
If you can’t reach a mutual agreement, you may need to apply to the court for a ‘Financial Order’ as part of the divorce proceedings. This order can specify what will happen to the home including whether or not you may sell it and how any proceeds from the sale should be divided. A solicitor will best advise you through this process if required.
Can my partner remove my name from the mortgage without my consent?
It is not possible to have your name removed from a mortgage without your permission. You need mutual agreement and to sign a Transfer of Equity document which is usually done in the presence of independent witnesses.
What can I do if my ex-partner refuses to pay their share of the mortgage?
If your ex refuses to pay their share of the mortgage, speak to your lender as soon as possible, especially if you are struggling to afford the monthly payments. They may be able to help by offering a short-term payment holiday, or look into options for reducing the monthly payments such as extending your mortgage term or transferring your mortgage to Interest Only.
You may also consider transferring the mortgage into your sole name or selling the property.
It is always advisable to seek independent legal advice in these circumstances.
We are getting a divorce and in Negative Equity. What are our options?
Negative Equity is where your mortgage balance is higher than the amount you would receive from selling your home. This means that you would be unable to clear your mortgage balance by selling it. If you find yourself in this situation, you should seek independent legal advice to discuss your options.
My ex-partner wants to keep the house but I want to sell it. What happens now?
If you both jointly own the home, you cannot sell it unless you mutually agree or a court order is issued. It is worth seeking independent legal advice if you cannot reach a mutual agreement.
How do I get a mortgage on my own after divorce?
If you have recently got divorced and wish to get a mortgage on your own, your first step should be to contact a mortgage adviser who can conduct a full affordability assessment and let you know you how much you can borrow and help you to work out your budget of what you can afford.
If you wish to get a mortgage on what was your marital home, you will need to apply for a remortgage. If you are looking to buy a new home, you will follow the same process as any normal home mover mortgage.
Can I use Maintenance Payments from my ex as income for mortgage affordability?
Some lenders will accept maintenance payments as a type of income for the purpose of your mortgage. However, your options will be much more limited if the maintenance payments are not court ordered or inconsistent. The age of your children and the length of time you have been receiving the payments for may also affect whether or not they can be accepted.
I pay maintenance payments to my ex-partner. Will this affect how much I can borrow?
Paying maintenance is likely to impact on how much you can borrow as these payments would be classed as a ‘committed expenditure’ in the eyes of a lender and affordability for a mortgage is based on your ability to make the monthly repayments.
Why should I use a mortgage broker for my mortgage when I’m getting divorced?
Getting a divorce can be stressful and arranging your mortgage under these circumstances can be complicated. Our expert advisers at The Mortgage Masters can help you navigate the mortgage market and ensure you get the possible outcomes for your circumstances.