Trying to get Mortgages when divorced – Divorce and separation – can never be an easy topic when you add a mortgage to the mix but one that many people need expert mortgage advice on to help navigate their way through. What happens to a mortgage when you decide to separate or divorce? Who must continue to pay it? Can one person ‘come off’ a mortgage? Can’t afford the mortgage on your own?
Let’s unpick these common FAQs about your mortgage when getting divorced…
Firstly, one person cannot simply ‘come off’ a mortgage when deciding to divorce or separate, even if they are both happy to make that change or if one person moves out of the property. Both people remain completely responsible for a mortgage, regardless of relationship status. If one person wants to be removed from it, the other person’s affordability would need to be assessed by the lender to ensure that they can afford the mortgage on their own. If that person can’t solely afford the mortgage the other person cannot be removed from it.
As far a mortgage lender is concerned, both parties are jointly responsible for ensuring payments are made. It often comes as a surprise to some that even if the divorce or separation is completely amicable a person can’t simply be removed because that’s what a couple decide to do.
Often separations and divorces are not amicable, but it is still vital that both people continue to pay the mortgage as BOTH credit scores can be very negatively impacted going forward. Missing a mortgage payment can result in bad credit that can affect you for years to come.
During the process of getting divorced, a split of assets will be agreed by both people. It’s better financially and emotionally if this can be done amicably between both parties. If a compromise cannot be agreed, then both people will need a solicitor to build a case on their behalf and then the case would be put to a court for a solution to be reached. It’s easier, quicker and cheaper to not go down this road if it can be avoided.
So, what happens to the property? There are 2 obvious routes here. 1) The property can be sold, and any equity split accordingly. Or 2) one person can buy the other out.
If option 1 is preferable, the property would need to be valued and sold so that the mortgage, (and any mortgage penalty), sale fees and solicitor fees can be paid. Any equity remaining would then be shared, according to the agreed split (sometimes 50:50 but not always).
Often however, one person wants to remain in the property and take on the mortgage either alone or with someone new (this doesn’t necessarily have to be a new partner). In this situation one person will ‘buy the other out,’ with their affordability being assessed to ensure that they can afford the repayments.
We would usually recommend getting 3 estate agent valuations and taking the average to decide on a value of the property. For example, if a property was valued at £200,000 and there is a mortgage remaining of £100,000 the mortgage and any fees would then be deducted from this total to leave the equity which is then split. For this example, let’s say there is £100,000 in equity and it is split equally, each person would be left with £50,000.
The person who wishes to stay in the property would need an additional £50,000 on top of the existing £100,000 mortgage to buy the other person out and release them from the mortgage. This would need to be assessed by the lender to make sure that is possible.
This is just an example and a very brief overview of the process of changing a mortgage due to divorce or separation. Adding in complications, such as children or other assets can make things more complex, and I would always recommend speaking to a family solicitor in the first instance.
If you have more questions about your individual circumstances and the process of what happens to a mortgage during divorce or separation, then get in touch with my expert team. Email us or call us for a confidential chat.