There are always unexpected twists and turns along your journey, but going through a separation or divorce when you own a home and have a mortgage together can be especially troubling.
Statistics suggest that up to 50% of marriages now end in divorce and one of the biggest discussion points – often the most emotional – is the fate of the family home.
Having invested time, money, and built up memories, not to mention the fact that children may be settled in a local school, it is no surprise that there is a level of worry attached to this.
If you do have a joint mortgage, the first thing to note is that both parties are jointly and severally liable for the mortgage. This means that if one partner does not pay the mortgage, the other is legally responsible for paying the whole amount.
If you are considering a divorce, it is essential you discuss the mortgage payment as a priority, however difficult this may be. Any missed payments will affect both of your credit scores and could mean neither of you will be able to take out a mortgage for some time.
If the divorce is acrimonious and one person refuses to pay the mortgage, it is essential you speak to your mortgage lender at the earliest opportunity to explain the situation.
Banks have a duty of care to look after their borrowers and may be more sympathetic to your situation than you may think. Remember, there is nothing to be embarrassed about in asking your lender for assistance and the earlier you do this, the more you can avoid issues in the future and give you some much-needed breathing space.
If you are going through a divorce and have a mortgage, there are several options:-
Sell and Move
Selling the property, paying off the mortgage, and splitting the equity 50/50 is the cleanest and easiest option that will enable both of you to move on in your separate directions.
If there are children involved, this may not be so easy, of course, or if you cannot agree on the percentage of split then this will be a matter for lawyers to discuss.
Buying Out Your Partner
If you do have children who are settled into the local school or do not wish to leave the property for a host of other reasons, then you may want to investigate buying out your partner. This involves taking over the existing mortgage and potentially increasing it to pay them a share of the remaining equity.
The first step is to ascertain if the remaining partner can service the existing mortgage and any potential increase. This is done as with any standard mortgage and your mortgage lender will use their standard affordability calculations. Your existing lender does not have to transfer the mortgage into one name and will only do so if they believe you can afford it.
As lenders differ where this is concerned it may be necessary to look at another lender and remortgaged for this purpose. This is a situation where a good, independent mortgage broker can be extremely beneficial because they can find the best mortgages for divorcing couples.
Lenders will take into account any maintenance payments that are being received, especially if backed by a court order, which can help to demonstrate affordability.
If you are able to do it then buying out your partner can be a very satisfactory way for both parties to break cleanly and move on with their lives.
If this cannot be done then you may have to consider a sale or continuing on a joint mortgage for the time being.
Maintaining The Existing Mortgage
For those separating, sometimes it proves difficult to sell the property or buy out the other party for a whole variety of reasons.
If this is the case, it may be better to continue with the mortgage as it is. This can quite simple, especially if you and your partner split on good terms, with both of you understanding the importance of keeping a good credit record and coming to an early agreement to maintain the payments.
It is a good move if you have high early repayment penalties, are nearing the end of your mortgage, or need to keep children as settled as possible in the short term.
You can always revisit the subject in the future when it becomes a better time to sell or remortgaged into one name.
We appreciate that sometimes partners can be unreasonable. If you do find yourself in a situation where your partner is refusing to pay the mortgage or threatening not to and you cannot maintain the payments yourself, it is imperative to speak to your solicitor and mortgage lender immediately.
Remember, they will be damaging their credit rating as well so a fast solution to the issue is always best.
Of course, there are a wealth of other elements to consider during this testing time, but dealing with the issue of the family home and mortgage early on, taking professional advice, or asking your lender for help can make a big difference to stress levels.
If you need assistance with your mortgage during a divorce or separation, please do not hesitate to contact us confidentially on 020 7220 5110.