When getting divorced or splitting up with your partner, it is important to consider what to do about your joint mortgage. It is already a stressful time with many decisions to make but to avoid unnecessary costs and complications, deciding what to do about the mortgage should be high on the list of priorities.
Here are some tips to help you make sure your mortgage and home are secure during this turbulent time.
1. Contact your bank
Let your mortgage lender know that you are separating as soon as possible. It is a common scenario and banks are usually sympathetic and may be willing to offer you a payment holiday. But this is only a temporary solution and the original mortgage agreement still stands so you do need to consider the long term.
2. Continue with your mortgage payments
If a payment holiday isn’t granted then you need to continue to make your monthly mortgage payments. If they are not paid on time, this can impact on both your own credit history and that of your ex-partner. It is important therefore, that mortgage payments continue to be paid throughout the negotiating period.
It is likely that one partner will move out of the family home in the event of a divorce or separation but remember that with a joint mortgage, both partners have agreed to be equally liable for the debt. This applies even if you no longer live in the property.
3. Decide whether to sell or keep the property
If you both want to move out of the property, selling it and paying off the mortgage can be the easiest way of dealing with a joint mortgage after divorce or separation. Once the property has been sold, any equity that is left is a marital asset and will be split during divorce proceedings.
You may want to buy a new property after the split, especially if you were able to extract equity from the sale of the previous property. Propillo have a series of up to date mortgage guides and free mortgage advice if you are looking to re-invest in property.
Keep the property
Scenario 1 – You both want to keep the property, even if you have both moved out. This may be the preference if a mortgage is coming to its end and is almost paid off or if the mortgage is fixed for several years. For this to be a viable option, ideally the divorce needs to be amicable.
To help afford the monthly payments, couples often decide to rent out the property.
Scenario 2 – One of you wants to keep the property. In this case, the partner who doesn’t want to keep the property needs to transfer sole ownership to the other. This requires the partner buying the other’s share and the equity in the property. The partner wishing to keep the property will need to prove to the lender that they can afford the mortgage.
The property will need to be valued to assess the amount of equity there is and a new mortgage will need to be taken in the one name. Speak with a mortgage adviser to find the right deal.
If you are in any doubt about what to do about your mortgage during a divorce or it you and your ex-partner can’t agree and there is a dispute, then it is important to seek legal advice.