What Divorce Means for Your Mortgage

Going through a divorce when you have an outstanding mortgage with your partner can be a big worry - knowing what might happen to your home can make it less stressful. Here's a rundown of your possible options.

Woman Complaining

More and more people are splitting from their spouses or partners - in fact nearly 50% of marriages now end in divorce - and when they do the fate of the family home can be a highly emotive subject.

Not only does the property represent a significant financial investment but it may also be the home where children have been raised and the family based over the years.

Exactly what happens to your mortgage will largely depend on your plans for the property and your individual circumstances.

Paying the mortgage

If you are going through a divorce and have moved out of the family home you may wonder if you need to keep paying the mortgage.

It's worth remembering that when two people take out a joint mortgage both are agreeing to be equally liable for the debt for the duration of the mortgage, not just while you live there.

In other words both you and your partner are responsible for ensuring the mortgage continues to be paid, and as a result any failure to pay on time will damage you and your partner's credit history.

This situation can sometimes lead to one person refusing to pay; threatening to do this can ultimately backfire if a court has to make a ruling on the divorce at a later date.

Contact you bank

As soon as you know you will be separating you should contact your bank - especially if you think you may struggle to meet your mortgage payments until the divorce is finalised.

Due to the frequency of divorce and separations most banks are more sympathetic than in years gone by and may even be willing to offer payment holidays to couples going through a separation.

While this can give you some breathing time while dealing with the initial separation, the original mortgage agreement will still be in place and a long term solution will need to be reached.

Your options

Going forward there are usually 3 broad options for couples with a mortgage;

1. Sell up and Move out

If both you and your partner will be moving out of the property then often the easiest way to move forward is to sell the house and pay off the mortgage.

This can provide a clean break and be the least messy way of moving on after a separation.

In these circumstances any equity left after the mortgage has been paid off will be considered a marital asset and split between the two of you.

Exactly who gets what from the leftover funds can be open to dispute, often the quickest (and cheapest) way is to reach an agreement between the two of you about who gets what.

If you can't reach an agreement then the matter would be need to be settled in the divorce court, where you would need to seek legal advice on your rights.

2. Keep the property & Buying out the other party

If either you or your partner intends to live in the home then chances are you will need to come to a solution that transfers ownership to the occupier.

Transferring the mortgage into one name will involve one partner buying the others share in the property, including their share of any equity involved.

The first hurdle you'll face is proving that the occupier will be able to afford the mortgage on their own - remember the existing lender is under no obligation to remove either of you or to transfer the mortgage to one name.

However, if you can satisfy your lender that you can afford the mortgage then chances are that they will agree to you becoming the sole mortgage holder.

You will then need to buy your ex-partner's share in the property before the mortgage can be put into your name - this may involve getting the current value assessed to determine the level of equity in the property.

Again if you need to borrow money to fund purchasing your partner's share you would need to prove that you could afford the additional borrowing.

Moving your joint mortgage into just one name can provide the same financial break as selling up while keeping ownership of your existing home.

However there are several obstacles to overcome and if there is some dispute over the value of the property or the level of equity due to your partner you could find yourself in court to negotiate a settlement.

3. Continue Paying Existing Mortgage

In some circumstances you may decide to continue paying the existing mortgage, especially if you don't have long left and the divorce is on good terms.

If you are considering this option you would need to ensure that both you and your partner can continue to afford to pay the mortgage and any other living costs.

This may also be a good option for the mid-term if you mortgage is fixed for a number of years and would mean you'd pay high mortgage charges to move elsewhere.

Negative Equity

If you are facing a divorce while your joint home is in negative equity then your options are likely to be restricted due to your inability to sell the home to pay off the mortgage in full.

In this situation you should speak to your mortgage provider to discuss your options, it may be that you will have to split the outstanding debt between you or come to an agreement with your mortgage provider.

Remember unless you act the joint mortgage will remain in place which will hold you equally liable for mortgage repayments.

Again if you are uncertain you should seek independent legal advice.

Seek Advice

Each of these solutions can appeal to separating couples in different circumstances, for example if there are no children involved then selling the property and cutting your losses may prove the best option.

However if property is the family home then either you or your partner may want to continue living there to reduce the impact of the divorce on your children.

Whatever option you are considering, you should seek independent advice on your circumstances; there are several charities that can explain what you will need to do and point you in the direction of legal advice if required.

No name on the Deed?

If you are separating from your partner and your name is not on the mortgage or deed of the house that does not mean that you have no rights or claim on the property.

When it comes to divorce in the UK the matrimonial home is considered a joint asset and you cannot be forced to leave by your partner.

If your name is not on the mortgage or deed you can register your matrimonial rights through the Land Registry to stop your partner selling without your consideration.

However, it is worth noting that if your partner owned the property before your marriage then you'll have little legal claim to it when it comes to divorce proceedings.

If you find yourself in this situation you should seek legal advice to determine exactly where you stand.

Disagreements & Legal rulings

Ultimately if your divorce has not proved as amicable as you had hoped and there is some dispute over who is entitled to what then you may be faced with going to court.

You should be aware that very rarely is it a case of a simple 50/50 split when divorce proceedings head to the courts.

Courts take into consideration a wide range of circumstances when making a decision on what happens to the marital home.

If there are children then their well-being will be the primary concern of the court, they will also consider both parties' financial circumstances when making a decision.

If your divorce has reached this stage then you will need to seek independent legal advice, while this can be a time consuming and expensive undertaking, it is the only realistic option you have when faced with a trip to court.

Remember to consider other financial assets

From an emotional perspective the fate of your home is likely to be at the top of the agenda when it negotiating a divorce, however you should also consider what will happen to other financial assets as well.

Most people believe the home represents their biggest marital asset, yet depending on age and individual circumstances pension funds that you have built up over the course of your marriage may actually be worth more.

It's important to take these other assets into account when discussing the fate of your marital home.

For a step by step guide to coping with the financial impact of divorce or separation take a look at our Action Plan: How to get a fair financial divorce settlement.

Responses

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My ex husband assaulted me (for which he was arrested) and threw my children and I out of the house which I bought before I met him. He changed the locks and has refused me access ever since. He refused to sell the house as he took out loans secured on it without my knowledge( including one after our separation) and defaulted on them. I informed the building society that I wanted the house sold, as I could not, and he would not pay the mortgage.but they did nothing even though the benefits people were paying the interest on the mortgage (he was in fact working) I ended up having to take out loans to pay the other debts he left me with and also had to go to a debt management company to organise other debt payments. Due to having to pay my own bills ( rent, council tax etc) I could not pay the mortgage, or anything toward it. I have now been informed they are taking action, and I am liable to pay. As I have no savings and struggle to pay my existing bills, can they force me to pay. He is still working and currently is sub-letting the property.

by draken, 19 Mar 2013
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