One of the biggest decisions that follow a marital breakdown is what happens to the family home – and the mortgage. It is very important to handle this aspect of divorce in a practical and cool-headed way, regardless of whether you intend to keep or sell the property. Here are the main points to consider about mortgages and divorce.
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What happens to a mortgage before divorce
A marital breakdown before divorce should not have any effect on mortgage repayments. In fact, it is very important to continue paying your share of the mortgage whether you still live in the marital home or not, as defaulting on mortgage payments could seriously affect your chance of owning a home of your own later on.
Mortgages and divorce: who to contact first
This very much depends on whether the separation is amicable or acrimonious. If it is the former, you first port of call should your mortgage lender. Most will be sympathetic towards couples having a tough time during a separation, and are likely to agree to a temporary suspension of mortgage payments if one of you has to move out immediately and rent somewhere until the two of you decide on what to do about the family home.
If the separation is acrimonious, and especially if your partner is defaulting on mortgage repayments and you are unable to pay on your own, you must contact a solicitor immediately (and the mortgage lender shortly thereafter), and begin divorce proceedings in order to commence the division of assets.
What are the mortgage options after divorce?
The two main options are selling the home, with both partners moving out, or one partner staying in the property. The easiest option is, of course, to sell the property, and this is indeed the most common solution for couples without children.
However, this may not be feasible for families with young children, and/or in cases where one partner is unlikely to be able to buy or afford to rent another property on their own. In cases where one partner (and any dependants) will be staying in the family home after divorce, several options are possible:
- One partner transfers part of their share of the property to the other as part of the divorce settlement; when the home is sold (often at an agreed time), they would still get a percentage of the sale from their remaining share;
- Keeping the joint ownership and joint mortgage for a period of time, for example until any children in the home reach the age of 18; both partners would continue paying the mortgage;
- Transferring the mortgage into the remaining partner's name: this is a good option for someone who is able to make mortgage repayments on their own, and is eager to end all financial ties with their former spouse. Importantly, this would also put an end to any joint credit history, protecting one ex-spouse from any future responsibility from the other's debts.
What to do if you are being forced out of the marital home
In some cases, an ex-partner may want to remain in the family home despite the other's wish to sell. If you are unable to buy out your ex-spouse because you earn significantly less, you may be able to obtain a court order that would defer the sale of the house until any children from the marriage reach adulthood, or, if there are no children, until you remarry (in practice, this could mean for life).
Complex cases such as this may require a solicitor's or mediator's help – although, for fairness' sake, it's worth saying that most divorce cases in England and Wales do not go to court hearing stage.
What to do if your name isn't on the deeds
One of the most important things that will determine what your rights are is whether your partner owned the property before you got married. Typically, the matrimonial home is counted as a joint asset during the asset division process, but this can be tricky if the home had been purchased before the marriage. If this is the case, you will need to seek legal advice. You may still get a proportion off the sale of the property if you're able to demonstrate that you will be in financial difficulties without those funds, but the division may not be 50/50.
One thing you can do to ensure you can stay in the matrimonial home temporarily (though usually not indefinitely) is apply for the Matrimonial Homes Rights notice to the Land Registry. This will give you the right to stay in the marital home until a financial settlement is reached.
What to do if you're in negative equity
How to proceed if you're in negative equity (i.e. the marital home is currently worth less than the mortgage on it) will depend largely on how amicable the divorce is. If the situation is amicable and you agree on the terms of the financial settlement between you, it may be worth exploring the option of becoming tenants in common – that is still co-owning the house without jointly living in it. You'll also be able to agree the final share each will get from the sale of property when it occurs.
In acrimonious circumstances, the best option is still to sell the home anyway, and split the outstanding debt between the two of you; some lenders may be willing to accept an amount that doesn't cover the outstanding debt, but is greater than they would raise by repossessing the property. We recommend seeking independent legal advice or consulting your local Citizens Advice.
If you're struggling to make mortgage repayments
If you are taking over the mortgage, but think making mortgage repayments on your own will be a struggle, especially if you are paying large amounts in legal fees during the divorce, ty the following:
- Apply for a guarantor mortgage, where a family member agrees to help you out if you can't make the repayments;
- Write a formal letter to your lender asking for a repayment break; this is not ideal, since you'll still have to pay the interest on the repayments, and your total mortgage term will become longer, but it is far better to try this than find yourself in a situation where your home could be repossessed.
How to prioritise the needs of children
The courts will prioritise the needs of any children under 18 living in the matrimonial home as standard; however, this doesn't always automatically mean that the house will not be sold, because the court will need to be satisfied that the children will have somewhere appropriate to live with each parent. Therefore, in some cases the sale of the home is inevitable, since it will allow both parents to have somewhere to live that's adequate for the children.
Where to go for legal advice
If you can't afford solicitors' fees, or if your divorce is amicable and you plan on doing it yourselves, but need some legal guidance, contact one of the following organisations (remembering that they offer advice only and not legal representation in court):
Remortgaging after divorce
In some cases, it may be necessary to remortgage the property, in particular when one partner is being bought out and a third party is involved and wants to be on the mortgage. This process is called a transfer of equity, and can be quite complex. It is best to seek legal advice in such situations.
If, having sought legal advice, you know that remortgaging is the necessary next step, now is your opportunity to find the best mortgage deal. We've teamed up with online mortgage advisor Habito. Use the form below to get an idea of what you can borrow, then speak to an advisor for free, unbiased advice about taking out a mortgage, help seeking out the best deals, and answers to queries you may have. They will use their insider knowledge to negotiate the best deal based on your financial history and current status, too.