Divorce, mortgages and adding partners. What happens when your situation changes

Divorce and mortgages: the basics

Who is liable for the mortgage after a divorce?

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.

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.  

Division of assets: how the house is treated

The majority of divorce cases are settled amicably out of court which considerably reduces the legal costs and time involved. 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.  

Taking over or paying off the mortgage after a divorce

Mortgages are usually paid from a joint account which both parties pay into on a monthly basis. Therefore all bills are usually split equally. But what happens when the couple’s romantic situation reaches breaking point?  

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.

Another thing to be aware of is the effect of missed payments on your credit score. Joint accounts do mean that your credit rating is associated with that of your partner, so if either party defaults on mortgage payments during the divorce process this could end up adversely affecting the credit score of both parties in the long run.

A bad credit rating could prevent you from accessing a whole host of financial products in the future, including a mortgage on a new property.

Usually, 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.

Other costs and notifications for divorce mortgages

Whatever happens with the mortgage, if you are the one taking on the sole responsibility it’s very important not to let the payments slip into arrears or you may run the risk having your home repossessed.  

If you are currently going through a divorce with your partner, you may need to tell:  

• Your mortgage lender  
• Your housing benefit office  
• Your council tax office  
• Gas, electricity and telephone companies  
• Your tax office, particularly if you're getting tax credits  
• The bank  
• Any companies that you have finance with  
• Insurance companies  
• The post office, if you want mail redirected  
• Your dentist and doctor

There is always a lot to think about when anyone is going through a divorce, and emotions can be high. We can offer impartial and unbiased advice to help you with your mortgage and try to make the process as easy as possible – so speak to your L&C mortgage adviser today for fee-free, award winning guidance.  

How to add someone to a mortgage

Sometimes, instead of (or as well as) removing someone from a mortgage, people want to add a new partner or spouse. This can happen in couples who are living together or when one person is helping with mortgage payments. Here’s what to know.

Can I add my partner to my mortgage?

If you and your partner have been living together, there may come a point where you want to add your partner's name on to the mortgage alongside yours.

If your partner is helping to pay off the mortgage or contributing to the bills, and especially where children are involved, it can be a sensible move to get them added to the property deeds and the mortgage.

However, it’s not just a case of changing the names on the mortgage with your lender. You'll need to apply to have your partner's name added, which will be subject to the standard income and credit checks, and you'll also need to have a solicitor involved to add the new name to the title deeds. The legal process is known as a ‘transfer of equity’.

Approach your existing lender

It's worth approaching your existing mortgage lender to see if they'll add the new name on to your current mortgage, especially if you're on a deal which is subject to Early Repayment Charges (ERCs). Your lender will run through a similar process to a new application, so they'll check affordability, credit history and the identity of both applicants prior to agreeing to add someone on to the mortgage.

Your current lender is likely to charge a fee for processing the request, and they're under no obligation to add someone on if they don't meet their criteria, regardless of how well you've managed your mortgage so far.

Remortgaging

Another option for you to transfer your home and mortgage into joint names is to remortgage the property to another lender. Again this will be treated as a new mortgage application and you'll need to provide proof of income, pass credit and affordability checks and have the property valued. It’s worth remembering that even if your existing lender won't approve the addition of another person then other lenders may as criteria will differ from lender to lender. It may also be possible to obtain a better rate by switching lender.

Association of credit

It's always worth bearing in mind that if you do change the mortgage to a joint basis or take a joint bank account, your partner’s credit will become associated with your own.

If you have a good credit rating, you need to consider that if your partner’s credit history is poor you could struggle to remortgage your property or borrow in the future.

Legal work

It’s vital that you take legal advice before starting the process of adding someone to your mortgage and title deeds. There are wider implications than just the mortgage payments which could include Stamp Duty, tax implications if it’s not your main residence and potential inheritance implications if you want to leave the property to someone specific.

There are often two options for those wanting to add a spouse onto the mortgage:

• Tenants in common – typically the couples in this situation each own a percentage of the house, which they are able to pass down to their children in the event of their death.
• Joint tenants – the most common option, you will both have equal rights to the whole property, and in the event of a death the property passes on to the other owner.

Your solicitor will be able to advise you on the most suitable way to set the property ownership up and of any potential tax liabilities that may arise. It’s also important to make sure you change any wills you have made to keep them up to date.