January is peak time for divorce lawyers as the number of couples deciding to officially go their separate ways spikes following the Christmas period.
Indeed, according to Hargreaves Lansdown the first working Monday of January, along with the first Monday of September, is the time lawyers receive the most enquiries.
One of the biggest headaches for divorcing couples is what do with the house and the mortgage. When children are involved the worry and stress of what to do with the family home can become even more intense.
But according to Mortgage Advice Bureau knowing how your divorce affects your mortgage, property and living circumstances will help you navigate through this tricky time with a level head. For example, you may have more rights to the home than you think and knowing this may provide some reassurance which can fuel you with the strength to get through the next few months.
A few factors to consider…
Here Mortgage Advice Bureau flags up few points for divorcing couples to consider which may help them move forward.
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Don’t panic about being forced out
First things first, as a spouse you have a matrimonial right to the home. Many separating couples choose to have one partner move out, but you don’t have to. Even if your spouse is on the title deed of the property, you both still have a right to live there.
If you’re worried about the house being sold from under your feet, because your name isn’t on the title deed, register your interest in the property with a Notice of Home Rights. This prevents your ex-partner from selling the property before the divorce is finalised.
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Who is named on the mortgage?
If you have a joint mortgage on your home, you’re both still legally liable for the payments right up until the divorce is finalised.
Neither of you should stop paying your share of the monthly repayments until the court agrees to your divorce, or you’ve agreed a different path (such as one of you buying out the other).
A default on a joint mortgage repayment could seriously affect your chances of getting another mortgage once you separate.
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Who pays what each month?
Knowing this will tell you how much of the mortgage a judge would expect you to pay off, plus the percentage of the sale price of the property you’re entitled to.
If one person put down the full deposit, this also needs to be taken into account. How much you put in proportionally when you first bought the house, plus who contributes to bills, monthly essential expenditure, and the purchase and sale expenses of the property, will all affect your end entitlement.
When considering your divorce agreement, a judge will factor your input into the relationship as much as your joint finances. The divorce courts will consider your emotional labour too.
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Are any children or pets involved?
Children can often cause some of the biggest tensions in an acrimonious divorce. The spouse who ends up taking on the children after the divorce will be entitled to family support payments from their ex, which also affects who can afford to buy a new property or remain in the family home.
Pets are less commonly involved in a divorce agreement, but you can still arrange financial orders to ensure their vet bills or monthly expenses are split between you and your ex-spouse.
These payments are important as they could impact your eligibility for another mortgage. If you’re the spouse making payments, this reduces your monthly capital, but if you’re receiving these payments, your monthly income will be larger (and this can help with mortgage applications).
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Do you own any other property?
If you jointly own other property, you’ll need to decide how you want to split the properties you hold.
Owning another property with another mortgage on it complicates the divorce a little, as there are now two (or more) monthly mortgage repayments to consider.
What are your options?
You have a few options when it comes to divorce and property.
Option 1: Buy out your ex-spouse
If you have the money, offer to buy your ex out of their share of the property. If you don’t have the full amount, you can arrange to buy a percentage of their share now and they’ll receive the remaining percentage when you sell the property (or can pay them in full).
Option 2: Sell the property and split the money
You could choose to sell the property and split the sale price proportionally based upon the percentage share you each hold. If your property sells for less than your remaining mortgage amount (called negative equity), you’ll have to split the debt between you.
Option 3: Pay off the mortgage together
You could both agree to pay your remaining shares of the mortgage, which is a straightforward solution if you’re nearing the end of the loan term and can afford the repayments. When the property is paid off, you can sell the house or the partner remaining in place could remortgage to buy out their ex.
Option 4: Apply for a guarantor mortgage
Agreeing to repay your mortgage is usually reserved for amicable divorces. If your separation is acrimonious, and you want to stay in your family home, consider applying for a guarantor mortgage.
This is when you can’t prove that you can afford the full monthly repayments. A guarantor, such as a parent, underwrites the mortgage. If you don’t meet the repayments, they’re liable for them.
Speak to your mortgage adviser for more help
Make sure you’re looking at your options in detail before you agree to anything. You’ll also want to know how the planned financial split of the divorce would affect your ability to apply for a new mortgage on another property.
Therefore, it’s important to speak to your mortgage adviser to seek advice that clarifies this confusing time.
