Sorting your mortgage out following a divorce or split from your partner simply adds to the heartache. It can be complex and feel overwhelming. The following information is designed to help you if you are currently – or anticipate – going through this financial change.
Impact on joint mortgage ownership
If both of your names are on a joint mortgage, you are both equally responsible for repaying it. Effectively, nothing changes on the mortgage until you have both worked out how you’re going to navigate the situation and make those changes. As far as the lender is concerned, you both signed up to the commitment and it’s your shared responsibility to honour it.
This means that regardless of your new living arrangements or who is the named contact, should your lender deem you to be in mortgage arrears, if you can’t repay what you owe, you are at risk of your home being repossessed. Each of your credit files would also be impacted.
Options for keeping the property
If you’d like to keep the property, there are various things you can do. The following outlines more commonly used mortgage options which would require the agreement of you both:
- One of you could buy the other’s property share. There will be a cost and isn’t always straightforward. Though, if children are involved, it could be the best way, as they wouldn’t need to be uprooted. It could also work if one of you is keen to stay in the mortgaged property. If just one spouse is moving, there’ll be no selling costs; however, on the flip side, it may not be possible and the remaining party will be responsible for selling costs, if moving, down the line.
- You could continue to co-own your home, agreeing on its deferred sale. Perhaps waiting until the youngest child has left school or until the spouse staying there can refinance the mortgage and buy the other party out. It could also work if you’re both happy for the remaining spouse to stay until ready to sell, with no deadline set. Any profits and costs from the property sale still need to be shared. To see if this is a practical solution for you, it’s a good idea to talk to a qualified mortgage broker.
Transfer of mortgage responsibility
If one of you wants to buy the other out, an application for a transfer of equity is required. This is to legally change ownership of the property on which there’s a mortgage.
The lender must agree. They’ll want to see evidence that mortgage repayments will be affordable and will carry out new affordability and eligibility checks.
Unless a third party is involved, the person the mortgage is transferred to will then be solely responsible for repayment of the loan.
Selling the property and dividing equity
If you both agree on selling up and moving out of the house, the proceeds of the sale are divided as per the agreement you’ve both settled upon. Arriving at this agreement might not be easy; a solicitor can help here.
There are also potential tax implications to contend with when selling, so professional mortgage advice could also be prudent.
