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Divorce and Mortgages
If you’re getting divorced or separating from a long-term relationship, sorting out your mortgage can be tough.
In this guide we explain how divorce can affect your mortgage, what your options are and how to buy out your ex.
Going through a divorce is an experience many don’t anticipate, and understandably, they often don’t consider its impact on their mortgage. Thankfully, there are solutions at hand, and this guide is designed to help you understand them.
Divorce, while deeply personal and often complex, inevitably leads to significant changes, especially in terms of mortgage arrangements. It usually involves the challenging task of redistributing assets and income, and often, selling the marital home, with each partner moving on separately.
What happens to a joint mortgage when you divorce?
A typical divorce in the UK takes between 10 and 13 months to complete. This is an average, taken from the time you submit a divorce application.
The reality is that if you involve a prior period of separation the process can take 1-2 years.
It’s often cited that a divorce takes around six months. But this does not allow adequate time for delays and disagreements.
So what happens to the joint mortgage?
The mortgage agreement
When a mortgage is in joint names both of the borrowers are jointly liable for maintaining the monthly repayments. You both signed the joint mortgage contract and the lender will hold you to it.
Legally, you both remain liable for the repayments even if you have moved out and now also need to pay for rent or other housing expenses.
This remains true until the agreement is changed.
Keep up the repayments
The most immediate issue when it comes to divorce and mortgages is how the mortgage will be paid, when both parties have separated.
Maintaining these payments will stretch most budgets, which now need to pay for two households instead of one. As a formal final settlement is some way off, it is important to find a solution to keeping up the payments.
Failure to do this will mean that both of your credit files will be affected.
Married or co-habiting
First, the mortgage lenders are not bothered whether you are married or not. They expect you (both) to keep paying the mortgage.
If you are not legally married then the process of dealing with the property and mortgage would normally be a lot shorter.
Married couples need to follow a more rigid process, which takes longer.
The lender
Talk to your lender about what is happening and explain any financial concerns you may have.
Your bank may be able to offer some breathing space by offering a payment holiday. This will certainly give most borrowers some time to gather their thoughts without worrying about the monthly payments.
But the payment holiday won’t last, and the missed payments will need to be repaid at some point.
You will find more useful information in our article: How do joint mortgages work?
Divorce and your credit file
We have established that a joint mortgage is still a liability for both borrowers, even though the relationship has broken down. Regardless of who is living where, you are both responsible for paying the mortgage until a financial settlement is reached.
Missed payments will damage your credit score and that of your ex.
When you take out a mortgage with someone, you form a financial link with them, even if you’re not married. Both of your names appear under ‘Financial Associations’ in your Credit Report.
This connection means lenders will check your financial partner’s credit when you apply for credit in the future, even if it’s just you applying. They do this because they think your ability to repay could be influenced by this association.
It’s not just joint mortgages that create this link; any joint credit application, like a shared bank account, can connect your credit reports.
So how your ex manages their credit agreements will affect your credit file until this financial association has been removed.
If you no longer share a mortgage with someone, but you’re still linked to them on your credit report, you can contact the Credit Reference Agencies to break the link.
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Your property options
There are a few different ways that a mortgaged matrimonial home can be dealt with.
While it can be difficult to do, having an open conversation with your ex-partner about these options can be invaluable, and can save time further down the line.
Any agreement made between yourselves will undoubtedly reduce your legal fees and avoid delays.
We will not comment on how any assets should be divided, or whether you need to wait for a consent order before acting, but it’s important you have a working overview of the possibilities.
Sell the property
Selling the property is a straightforward option where neither of you can afford the mortgage on your own, or neither of you want to keep the property.
The sale proceeds will be used to pay off the mortgage and any other secured debts. You may find that there are also some early repayment charges to pay.
Any remaining funds will be split between the owners.
This money can then be used as a mortgage deposit for a new home.
property BUYOUT
A property buyout is a very common solution.
It will require formal changes to the mortgage and updating the ownership records at Land Registry.
This is known as a transfer of equity, when one partner stays and buys out their ex-partner who will leave the home.
It’s a good option where one party would like to remain in the property and can afford the mortgage payments.
KEEP the property
You both decide to keep the property and come to a financial agreement about who pays the future mortgage payments etc.
One person stays
One of you continues to live in the property but the mortgage and ownership is still joint. This can be a good solution if you have children. A Mesher Order can be implemented to set out what future events would trigger a sale.
Rent the property
You could both keep the property and rent it out. Perhaps as a buy to let or holiday let. Either option would need the mortgage to be changed to allow letting.
ALWAYS GET LEGAL ADVICE
In the UK, the legal framework surrounding divorce is complex, making professional guidance essential.
A divorce solicitor will help you understand how UK laws apply to your specific situation. They provide clarity on your rights and obligations, especially regarding the division of property and debts.
One key aspect where legal advice becomes indispensable is in making informed mortgage-related decisions. Whether it’s about understanding your eligibility for a mortgage post-divorce, negotiating the terms of a mortgage transfer, or making decisions about selling or retaining the family home, your solicitor ensures that these decisions are fair and legally compliant.
Moreover, in conjunction with financial tools like Mortgage Capacity Reports, legal advice helps paint a clearer picture of your financial standing post-divorce.
Your legal adviser plays a key role in drafting and negotiating these settlements, ensuring they reflect your best interests and legal rights.
Mortgage Capacity Report
In a divorce, figuring out finances, especially about your home, can be tough. That’s where a Mortgage Capacity Report (MCP) can help.
It’s a detailed analysis, done by an authorised mortgage adviser, which shows how much mortgage you might qualify for after the divorce. It looks at your income, debts, property value, and other financial stuff.
This report is important because it helps make fair decisions about who gets the house. It’s a formal document which can be used in court to help judges understand your financial situation.
You’ll have to give accurate info about your income, expenses, credit history, and other financial details.
The Mortgage Capacity Report is just for you, but you can share it with others like your solicitor. It’s especially useful if you need to change the mortgage to just your name or if you’re buying out your ex-partner.
Getting a mortgage after divorce
Applying for a mortgage after you have been divorced can be a bit trickier.
But it doesn’t have to be.
If you are still named on another mortgage then this must be disclosed to the lender (it will appear on your credit file anyway).
Where you are still part of the marital home joint mortgage any missed payments by your ex-spouse will make lenders wary of lending to you. If these problems are serious they may affect your ability to secure another mortgage.
In all cases it’s wise to keep all relevant paperwork about your divorce and how the property and mortgage were altered.
Make sure you always register on the Electoral Roll when you move to a new address, and keep copies of utility bills.
Plan ahead
If at all possible, try to plan ahead for when you need to apply for a mortgage. This allows you time to gather your paperwork and be better prepared.
You need to be aware of the position you need to be in for the application to be successful. This could involve saving for a larger deposit or improving your credit score.
A mortgage broker will be able to assist you with this, helping you to be ‘mortgage ready‘ when the time comes.
Am I considered a first-time buyer after divorce?
You can only be a first time buyer once.
So you wouldn’t be considered a first-time buyer following a divorce if you were previously a co-owner of a residential property. This is because first-time buyer status is reserved for individuals who have never owned a property in the UK or abroad, even if they are no longer associated with that property after a divorce settlement.
How to buy someone out of a house
A mortgage buyout involves removing someone from both the title deeds of the house and the mortgage.
You could:
- Buy out your ex-partner and become the sole owner
- Buy out your ex-partner and add someone else
A mortgage buyout is known as a ‘transfer of equity‘ and this can be done when you remortgage the property.
If you are married and going through a divorce, you will need to wait for the final settlement before knowing how much your share is worth.
The value in a mortgaged property is called equity.
It’s the part of the property that is owned outright, and this value will belong to the property owners.
Equity = House value less outstanding mortgage/s
When you buy someone out there is an expectation that they will receive their share of the equity as part of the deal.
Unless you are in a position to pay your partner in cash, remortgaging to a new lender and borrowing the extra money is the option most people choose. You will need to make a full mortgage application to the new lender, and they will need to make sure that the larger mortgage is affordable to you.
Applying for a transfer of equity remortgage
Remortgaging to buy someone out involves making a new mortgage application to a new lender.
If you intend to borrow some of the equity as a means to pay off your ex-partner then this should happen at the same time. This would be a capital raising remortgage. So the amount you apply for will be the current mortgage balance, plus the equity share value.
As it’s a new application the lender will need you, and any new joint borrowers, to pass their assessments.
Possibly the mortgage important of these is the affordability assessment. This looks at your current income and expenditure to see how affordable the new mortgage repayments will be.
You will find more useful information in our guide to transfer of equity mortgages.
How a broker can help
Working with a mortgage broker will take some of the pressure off of you.
They will be a valuable resource for understanding how a divorce affects a joint mortgage and the different options you have.
An independent broker will have access to over 100 lenders, this means you get the maximum choice of lenders and mortgage deals.
If your situation is complicated then the broker will be able to explain this to the lender, often by directly speaking to their underwriters.
Let Respect Mortgages put you in touch with an award winning whole of market mortgage broker.
To get started, call us on 0330 030 5050 or use the form below.
Independent advice is available across the UK.
Ready to explore your options?
If you’re just about to start a new mortgage journey and could use the guiding hand of a professional, don’t hesitate to reach out to a reputable mortgage broker.
An independent mortgage broker can access over 100 lenders on your behalf. They will make the process smoother and more profitable than going it alone.
Keep reading, keep asking questions. The more you know, the better decisions you can make.
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A Mesher Order is a legal arrangement that allows you, or your ex-partner, to continue living in your shared home for a specified period, typically until a certain event occurs, like your children leaving school. Under this order, the house cannot be sold until this specified time or event. This option can be particularly appealing if maintaining stability for your children is a priority. However, it’s important for both parties to agree to continue paying the mortgage and any other associated living costs during this period.
The information provided on this page is intended for informational purposes only and does not constitute financial advice. We understand that dealing with a mortgage during a divorce can be a complex and sensitive matter. It’s important to note that individual circumstances can vary significantly, and the information presented here may not be applicable to all situations.
We recommend seeking independent legal and financial advice to fully understand your options and obligations. A qualified mortgage broker can assist in evaluating your specific circumstances, particularly in understanding how to manage your mortgage during and after a divorce.
