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What does divorce mean for your mortgage?
Getting divorced is undoubtedly a stressful time for everyone involved. Not only must you and your spouse separate, but you must also decide how to divide your shared property, including the family home. Unfortunately, there are no easy answers when it comes to dividing your home between two people who no longer want to be married.
If you're like many people, your home is one of the single largest investments you will make in your lifetime. With this financial and physical investment comes an emotional investment as well—most couples spend years fixing up their homes to suit their tastes and family needs. And because it is such a significant investment, there are plenty of questions to ask yourself when it comes time to divvy up the home.
Here are five questions every divorcing couple should ask themselves before making a final decision on their mortgage:
- What is the value of your home?
- How much equity is in the family home?
- Do you have to sell the home?
- If one of you decides to buy the other out of the home, can you afford mortgage payments on your own?
- If your former spouse moves out, do you need to refinance?
What if you haven't got a joint mortgage?
Even if you haven't got a joint mortgage on your home, if you are married, then you should know that the courts will almost always view your home as a marital asset.
As such, it will be up to you and your spouse to sort out who gets what share of the home after you are divorced. Knowing how this process works will help ensure that both parties are treated fairly under the law.
What if one of us decides to carry on living in the home?
When you divorce, one of the first things that you must determine is whether or not one of you will continue to live in the house after your marriage ends.
You can take a few different paths when dividing property during a divorce, but one of the most popular methods is to sell the house and split the profits. If there is enough equity in the home, this option may allow you both to raise enough for a deposit on another home.
If one of you decides to remain in the home, your next step is to determine which of you will stay and who must leave. If you have children, the parent with whom the children reside most often may choose to remain in the house after divorce. In this situation, one spouse may buy out the other's interest in the property.
Whether or not this arrangement will work depends mainly on your individual circumstances.
Transfer of equity in a divorce
If you want to have your ex-partner removed from the mortgage and the title deeds, you will need to apply for a transfer of equity to have the home registered solely in your name.
Your ex-partner will need to agree to this new arrangement, and you will need to meet the affordability criteria with your mortgage lender. This is because your mortgage lender will need reassurance that you can make monthly mortgage repayments (as well as your other financial liabilities) using your sole income.
Can I force my ex-partner to pay half the mortgage?
If you have a joint mortgage, you are both jointly liable for making mortgage repayments. If you fail to make monthly mortgage repayments in full, this will affect the credit history of both people named on the outstanding joint mortgage.
Missed mortgage payments are one of the main factors that mortgage lenders look at when assessing whether or not to grant you a new mortgage.
If your ex-partner is not making mortgage payments, you should speak to your mortgage lender if it means that you are at risk of missing payments and seek legal advice. Your mortgage provider could take steps to make the mortgage more affordable, such as extending the term or switching to an interest-only mortgage to reduce monthly payments.
Can my ex keep the house after divorce?
Whether or not your ex-partner remains in the house after the divorce settlement is finalised will depend on what you have agreed between yourselves. This is the case regardless of whether or not you have a joint mortgage on the property or not.
If you cannot reach an agreement between yourselves, the court will decide how to share matrimonial assets.
What should I do if my income alone can't maintain the mortgage?
If you're struggling to afford the mortgage on your sole income, then speak to your mortgage lender or mortgage broker. There may be steps that you can take to reduce your monthly payments longer term, such as getting a new mortgage deal, and you could be granted a payment holiday to help in the short term.
If you are struggling with other debts, there are other options, such as getting in touch with debt charities such as StepChange or Citizens Advice for advice about debt management.
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My marital home has negative equity, and my ex is forcing a sale – will I end up in debt?
Your matrimonial home is seen as a joint asset, and one partner cannot legally force the other party to sell the property. This is the case regardless of whether the property is registered to a single owner or financed with a single or joint mortgage. The one caveat is that if your ex-spouse bought the property before you were married, this could complicate matters - seek independent legal advice if this is your situation.
If there are children involved, their welfare is also considered - even after the financial settlement is finalised.
As part of your financial settlement, you must agree on splitting property and other assets. This can be straightforward if you agree, and a mediator can help you reach an agreement. If you cannot agree on how to split marital assets and joint debt, then the courts will decide on this for you.
If your marital home is in negative equity, this will be taken into consideration during the process, but you will need to consider how to manage this debt. In this situation, it may make more sense for one party to buy the other out of the house - and you can get a new mortgage deal.
Find your perfect mortgage with Teito
Divorce is one of the most stressful life events that you will experience. For some people, the process of sorting out finances and property ownership can be an added source of stress that they really don't need.
At Teito, we compare the best deals from hundreds of lenders to make finding a new mortgage as stress-free as possible.
If you're struggling to afford the mortgage after divorce proceedings have been finalised, then there are steps that you can take to manage your finances and lower your monthly payments. As your expert guide to mortgages, we're here to help you manage your new financial situation with ease.
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Last updated 21 February 2024