Divorce or separation from a long-term partner can be a traumatic experience. However, if you and your ex-partner have a joint mortgage, you might be worried or confused about what you need to do. To help you understand the basics of what to do with your mortgage during a divorce or separation, we’ve put together the following guide to make things a little clearer and, hopefully, a little easier for all concerned.
First, much of the information in this guide deals with the issues of having a joint mortgage with your partner. However, we also highlight some issues that might come up if the mortgage on your home is held in just you or your partner’s name only, so people in this situation may find this guide useful as well.
The first and most important thing to do with any mortgage is to continue making repayments – even if you are no longer living in the home.
In a joint mortgage, both you and your partner are responsible for the repayments and a mortgage company is quite entitled to expect these to continue. Moving out of the home does not remove you from your legal obligation to keep up repayments.
Get in touch with your mortgage lender as soon as possible and update them on your current circumstances – especially if there are issues with repayments. Of course, not all splits are amicable, and it might be that your partner is now refusing to pay their share on a joint mortgage or there is some other problem with your repayments. Don’t wait until mortgage repayments start being missed – get in touch with your lender straight away and explain the situation. Lenders who don’t know why the repayments have stopped can’t do anything to help – and the vast majority will appreciate early notice of any potential problems.
If the breakup of your marriage, partnership or long-term relationship is amicable then this can go a long way to making things easier when dealing with a joint mortgage. Both parties can decide what they would like to do with the home after a split and basically you have three choices:
If you are financially able, you might want to assume sole ownership of the property, including all the mortgage payments and remain living in your home. Obviously, in this case, you’ll need to ‘buy out’ your ex-partner. You’ll need an up-to-date and independent valuation of your home to determine how much it is currently worth, as well as determining what proportion of the house they are entitled to.
A word of warning here: not everything can be split 50/50 and if your partner has been paying more or less as their contribution to the mortgage this can affect the proportion of the house they own. If you can’t agree a mutually acceptable figure, then you may well have to go to mediation or even ask a court to decide.
There are many factors that a court will consider when deciding how much of your property is owned by either party. In the unfortunate event that you must ask a court to decide, make sure you have appropriate legal help. If money is a problem, you’ll find that free advice services – such as Citizen’s Advice – can provide assistance and even have a list of solicitors who offer legal help to those in your circumstances.
Once you (or the court) has decided how your property is to be split, you can arrange a mortgage to buy out the other party and assume sole responsibility for repayments.
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Of course, you might be in the position of being bought out by your ex-partner. As above, you’ll need to agree what a fair percentage of the property is that you own. This is by mutual agreement, mediation or by a court if you cannot reach an agreement that all parties will accept.
Once you have been paid off and your proportion of the joint mortgage is formally assumed by your ex-partner by way of a deed issued by the lender, you will be freed from all further repayments. From here, you can think about buying a new home and organising an appropriate mortgage, or arranging other accommodation such as renting.
This last option is perhaps most likely for couples who don’t have children. Basically, this is where you both agree to sell your former home, repay the mortgage and move on. Any money that you make after your home has been sold and the mortgage repaid can be split between the parties. Again, the only potential stumbling block is if either of you feels that a 50/50 split is not fair. In this case, you have the choice of agreeing a figure that you are both happy with or, if you cannot, going to mediation or asking a court to decide. In any case, once the mortgage is repaid, you are now free to think about obtaining a mortgage on a new property as a single applicant or to consider alternative options.
Being in negative equity brings several problems when divorcing. Since the sale of the house will not raise enough money to pay off the mortgage in full, you and your ex-partner will have to agree on a way to split the debt.
If the split is an amicable one, you may both agree to keep up your joint mortgage repayments until market conditions improve and the house price increases. Once it has left negative equity you can then proceed with selling the property and splitting any money left over.
Things can get a lot more complicated with negative equity if one of you wants to stay in the home by buying out your ex-partner. The important thing to remember is that as you are in a joint mortgage, you are both equally liable for the repayments. You cannot stop paying your share, even if you are not living at the property anymore. In a similar vein, you cannot stop making payments even if your partner ceases to contribute – again, the key thing to remember is that with a joint mortgage, you are equally liable to make sure repayments are made.
The most important thing is that you speak to your current mortgage provider at the earliest possible time. Sadly, divorces and separations are common – you’ll find that most lenders are sympathetic and have established procedures in place to help, such as offering a payment holiday to get you over a difficult patch, talking about remortgaging or even a new deal.
Failure to make payments can obviously lead to you losing your home through repossession, along with the severe impact it will have on your obtaining any form of credit for years to come.
As with buying or selling any home, there will be many related expenses and legal formalities to consider. Unless you can find a deal that covers them, any property sale will involve both valuation and legal fees.
In addition, there may well also be land registry fees and extra charges made to change the names on deeds, etc.
These should be discussed and agreed before the sale or transfer or the property is completed. Being unable to come to a mutual agreement will again result in having to go to mediation or asking a court to decide.
“If you find you cannot afford a mortgage on your own after a divorce, you might consider a guarantor mortgage. This is where a close relative (parents, grandparents, etc.) agrees to keep up the mortgage repayments even if you can’t”
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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.