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A divorce is something most people don’t expect to go through, so it makes sense they don’t plan their mortgage around that eventuality. There are solutions though. We’ll walk you through your options in this guide.
Divorce is one of the more stressful reasons for changing your mortgage arrangements. It’s a very personal process which can turn out rather expensive. Divorce usually results in the redistribution of assets and income. Often, the former marital home is sold, with both partners seeking somewhere else to live.
We always recommend that both partners seek independent financial planning and tax advice to make sure the best outcome is achieved. It’s also important to look carefully at the divorce and mortgage arrangements available to you and to consider all your options.
People get divorced all the time. In fact, over 100,000 people divorced in 2017 in England and Wales. It’s a common occurrence, yet many people don’t actually know what happens to their mortgage after they divorce. We’ve outlined some of the main options and frequently asked questions on mortgages and divorce below.
Sadly, divorcing your spouse when you have an outstanding joint mortgage together isn’t an easy process, but it is possible and it happens everyday. There are 2 possible routes you can take to help achieve an amicable result, allowing you both to move on with your lives.
You can either:
When a couple takes out a joint mortgage on a property, both people are liable for the repayments, even after separation, until it’s eventually paid off or one of them is removed from the mortgage. This is true regardless of whether you’re living in the property at the time.
The sales process can be slow, so it’s a lot easier when you and your ex-spouse are on good terms. It makes everything a little more straightforward. Often, a spouse will move out of the marital home during divorce proceedings to minimise tension, but this doesn’t mean they surrender any rights to the ownership of the property.
While some people choose to sell their house before a divorce settlement, most will sell the home after their divorce settlement is complete. It makes sense then, that some would prefer to move out before the sale. It gives you both time to decide how best to share the revenue you’ll generate from selling your marital home.
You may agree to keep the property within the family once the divorce has been settled, perhaps to ensure your children can still grow up in their home, or simply because one of you wants to stay there. If you decide to do this, you’ll need to transfer ownership of the property into one person's name - either yours or your ex-spouse’s.
If you find yourself in this scenario, a licensed conveyancer can help you complete the transfer of equity. It’s important to note that your mortgage lender must agree. The new sole owner will also need to prove they can financially afford the mortgage repayments after separation.
Nowadays, there are even some lenders that allow a scenario known as “joint borrower sole proprietor”. This is where the lender allows 2 people on the mortgage for affordability purposes but only one of them is named on the title deeds. This can be a good solution for some people, however it should never be considered lightly as one will be liable for the mortgage but have no ownership rights to the property itself.
There are various ways you can attempt to buy out your ex-partner to take full ownership of the marital home:
If your marital home is mortgage-free and you wish to stay in your house after your partner moves out, you may want to try and reach an agreement whereby you pay them a lump sum based on the share of the property they have. Once the payment is made they can be immediately removed from the title deeds.
Speak to your lender if you have a joint mortgage and wish to buy out your ex-spouse. The lender needs to be sure that you can afford the monthly repayments on the whole mortgage based on just your income, so they’ll likely perform income and expenditure tests. As soon as the remortgage is completed the person leaving will receive the money for their share and their name will be removed from the title deeds.
If you can’t meet your current mortgage payments alone, then you could pursue a guarantor mortgage. Certain mortgage lenders will agree to lend you money providing that a guarantor – often a close family member – agrees to make the mortgage repayments if you’re unable to pay. Guarantor mortgages aren’t that easy to come by, so it’s often best to use a broker who can find you the best deal. A joint borrower sole proprietor arrangement might work as a more suitable alternative.
Is it harder to apply for a mortgage after a divorce? It can be if you’re still on the joint mortgage of your marital home, especially if your ex-spouse fails to keep up with the mortgage repayments.
Some lenders will instantly refuse your mortgage application if you’re already connected to another mortgage. That’s why a mortgage broker can be useful. We can not only find you a lender that we know understands and looks to accept such situations, but we can also find you the best deal for your circumstances.
It’s possible for you to have 2 residential mortgages, although it’s often the maximum accepted by lenders in the UK. Of course, you’ll have to demonstrate to the new lender on the second mortgage that you can afford to pay both mortgages. Your new lender will usually deduct the monthly payments you make towards the original mortgage from your monthly income before deciding the maximum amount you can borrow for a second property.
If you want to remove your name from a property’s title deed, you must complete an AP1 form and sign the transfer deed (TR1) form. You then need to send all completed forms to HM Land Registry. Your solicitor may be able to help with this process. You’ll have to obtain the lender’s permission if a mortgage still exists on the property.
It can be challenging for divorced or separated parents who receive child maintenance to find a prospective mortgage lender that will take child maintenance income into account when reviewing their application. Some lenders are beginning to show more understanding. They might be able to incorporate child maintenance payments into overall income. Often, they’ll want to see that the maintenance is paid by a court order via the Child Maintenance Service (CMS) and has more than 5 years to run.
Remortgaging your home is an option if you want to buy your ex-spouse out of a joint mortgage after you separate. Just bear in mind that this will likely increase your monthly mortgage repayments, so you need to ensure you have enough monthly income to meet your new commitments.
Understanding your mortgage options during or following a divorce or separation can be tricky, but that doesn’t make it any less important. John Charcol's team of mortgage experts are here to help. We’ve laid out some of our most frequently asked questions below. If you can’t find what you’re looking for below, then see our Separation or Divorce FAQs section.
It’s a misconception among many people that all assets between couples are split 50:50 during a divorce or separation. Although this may be a starting point, courts have the right to deviate from this ratio if it’s deemed fair and reasonable to do so. This may be for childcare purposes, economic reasons and/or the current and potential earning capacity for each partner.
If you wish to sell your jointly-owned property and your partner doesn't – or vice versa – the person that wants to sell may undertake an action of Division and Sale in court. The other party can appeal to the court for a division of the proceeds or purchase the property at its market value - or a value agreed by the court. The court can also sanction the sale if the other partner is unable to accept for medical reasons, or if the other partner cannot be located.
Moving a joint mortgage to a sole-name mortgage is a process known as a transfer of equity. You transfer one of the partner's rights and obligations as the property and mortgage owner to the other. If you and your partner agree – and obviously your mortgage lender agrees too – then you can apply to your lender for a remortgage and transfer of equity.
Your name can’t be taken off the mortgage without your permission. If the mortgage and property are in joint names, your signature is required to remove you from the mortgage. Even if you agree, your mortgage lender won’t permit it unless your partner meets their standard lending criteria and can afford the mortgage based on their sole salary.
Separation or divorce is a challenging but sometimes unavoidable situation for a lot of people. Our independent mortgage brokers are here to relieve some of the pressure and, ultimately, support you on your journey to reach the best possible outcome for your future.
You can find out more about how separation and divorce can affect your mortgage in Ask the Mortgage Experts.