Written by: Andy Walton - Proposition Director - Protection
One crucial aspect to navigate is the impact on your mortgage, especially if you and your ex-partner share a joint responsibility. Here’s how divorce could impact your mortgage:
Shared responsibility, separate lives
Under a joint mortgage, both parties are equally liable for payments, regardless of living arrangements during or after the divorce. Missing payments can negatively impact both your credit scores and, ultimately, lead to repossession. Even if one partner moves out, they remain financially responsible, since their name is on the agreement too
Navigating the options
You can explore several paths based on your circumstances and future plans:
Selling the house: This option offers a clean break financially, but can be emotionally challenging, as the family home is often tied to memories and experiences. That being said, it’s an option for many, as proceeds are then divided according to the divorce settlement.
Buyout: One partner can remortgage the mortgage in their name, assuming full responsibility for payments and ownership. This requires the passing of an affordability assessment and lender approval. There are a few options involved in this, such as remortgaging for the original value of the home and splitting the drawn equity, keeping the capital as is, or only removing some of the equity in the home. This may best be discussed with both a mortgage adviser and a legal professional.
Transfer of equity: Similar to the above, with one major difference. One partner takes over the mortgage payments, with the other receiving their rightful share of the property's value. This often involves legal agreements and potential tax implications.
Seeking help
Navigating these complexities alone can be difficult. Consider seeking professional guidance from a:
Mortgage adviser
Guides you through remortgaging options and ensures you meet lending criteria
Financial adviser
Can analyse your individual circumstances and offer financial planning strategies
Divorce lawyer
Understands legal implications of different options and ensures agreements are drafted correctly
What if children are involved?
Divorces can be tough, especially when children are involved. Often, disagreements about who takes care of the kids are the biggest source of conflict. The parent who gets primary custody usually receives financial support from the other parent. This can affect who can afford to keep the family home or buy a new one.
Divorce brings many challenges, but with clear communication, informed decisions, and professional support, you can navigate the financial aspects, including your mortgage, with a clearer path towards a secure future.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
Related Articles
Getting ready to remortgage
Should I remortgage?
