Divorce and mortgages

On January the 4th, the first working day after Christmas, #DivorceDay was trending on Twitter. January is unofficially known as ‘divorce month’ as it’s widely believed to be the busiest month for enquires about divorce received by solicitors. It’s thought Christmas plays a large role in this spike, with increased stress over the festive period trying to achieve the ‘perfect’ Christmas, lots of uninterrupted time spent with immediate family and stretched finances afterwards. This year, Covid may have been an extra stress.

If you’re considering a divorce one of the most important steps is sorting out your joint finances. Unfortunately it’s often the case that one of the main parts of the settlement is who gets to keep the house. So what does this mean for your mortgage?

Who is liable for the mortgage?
If you and your partner have applied for a joint mortgage (as most married couples do) the property will most likely be held in both of your names. In this particular case, both involved parties will be responsible for the mortgage – and either one of you could be held liable for the payment of the mortgage regardless of whether you are currently living in the property.

If you fall behind with the mortgage payments the lender can pursue either one of you for the outstanding payments. Missing mortgage payments will also have an impact on your credit rating and affect your chances of buying another property or obtaining a new mortgage, so it’s important to keep up payments regardless of the end of the relationship.

As part of the settlement the courts may decide that one party has to pay spousal maintenance, and this can include the cost of mortgage repayments whenever a final settlement is agreed upon.

The division of assets
The majority of divorce cases are settled amicably out of court. But if the case needs to be referred to a court of law, a judge will assess each case differently depending on the situation. However, generally speaking, if there are children involved, usually the person that has the primary custody of the children will also be awarded the house and the person who does not will be asked to move out by the judge.

The property will also need to be valued for the settlement. This figure can either be reached amicably by the couple, or failing that a qualified surveyor can carry out a valuation.

Paying off the mortgage
Mortgages are often paid from a joint account which both parties pay into on a monthly basis. Therefore all bills are usually split equally. If a financial settlement cannot be agreed in the event of divorce proceedings the courts may need to be involved. Usually if the house is in joint names, with no children or significant one-sided wealth involved, the equity is split 50/50.

Typically, as part of your financial settlement either you or your ex-partner will become the sole owner of the property. The other party will be removed from the title deeds and the remaining party will take sole responsibility of the mortgage and all of the bills. If you are looking to take the mortgage over it’s worth bearing in mind that you will need to be able to afford the mortgage in your own right, and your current lender or any new lender will need to assess your financial situation before granting you the mortgage in your own name.

What next?
There’s always a lot to think about when entering or going through a divorce, and emotions can be high. At L&C, we can offer advice to help you with your mortgage and try to make the process as easy and straightforward as possible. We can look at deals from across the market, hopefully saving you some money on your mortgage with a better deal. And don’t forget, our advice and help is fee free so we won’t charge you for our service.