What happens to a mortgage after a divorce in the UK?
What happens to a mortgage after a divorce in the UK?
When filing for divorce or ending a civil relationship with your partner, it may be necessary to consider how to deal with an outstanding mortgage.
Let’s look at the options so that you can make an informed decision that is best for you
Divorce and Mortgage
If you are divorcing or ending a civil partnership, both you and your ex-partner’s names may be on the mortgage. If so, you are both responsible for paying the mortgage until such a time as a legal financial settlement is achieved, even if one of you is no longer living in the house. A mortgage is a legal and binding document which holds responsible anybody whose name is listed until such a time as the mortgage has been paid in full.
Missing payments can lead to a plummeting credit score and even repossession of your home. A first step after deciding to divorce or dissolute is to contact the mortgage lender to make them aware of your situation, especially if mortgage payments may become an issue. A temporary solution that some banks offer is a payment holiday to ease the financial strain and allow time to make a responsible decision.
Possible long-term solutions
There are a number of options relating to the home for couples who are separating, and what you decide will have an impact on your mortgage. Examples of some of these options are:
- Retaining a Joint Mortgage
If one person wants to stay in the home, and the other party agrees to move out, you could continue paying the mortgage jointly. This may be a possible solution if you are close to paying off your mortgage. If not, there will need to be an agreement as to who pays the mortgage. The other party may have to continue to pay the mortgage, or it may be possible to have the house and the mortgage transferred into the name of the party who wants to stay in the home.
There are advantages to one party staying in the home. If you have children, for example, this option may be best for them to prevent a disruptive change during what may already be a difficult time for them. An order can be obtained which provides that one party can stay in the home for a specific period of time until a named event, such as until the children leave school. Once the named event occurs, the property can be sold, and the sale proceeds would be split between the two of you according to the agreement that you had reached.
- Transfer and buyout of Interest
As noted above, if one party wants to continue living in the home, it may be possible for ownership to be transferred to that person. It may also be possible to arrange for the mortgage to be transferred provided the party who remains is able to meet the criteria of the lender to have the mortgage transferred. In this case the mortgage would be legally transferred into the name or the remaining party, and there would be settlement of the other party’s interest, e.g. there may be a buy-out of the other person’s share.
- Partial transfer of value
If one party cannot afford to buy out the other party’s share, the property can be transferred from one partner to another as a part of the financial settlement, but the other party will still retain an interest. This allows one party to maintain a stake in the home which can be expressed as a percentage, so their share will increase should the property value go up when it is sold in the future.
In all cases it is important that you discuss your situation with a legal advisor to ensure that all of your options are considered, and your interests are protected.
What is a guarantor mortgage?
If you cannot obtain a mortgage in your sole name, it may be possible to arrange with the lender for a guarantor mortgage, where a friend or relative agrees to guarantee the mortgage payments for you if for some reason you are unable to meet them. This means the guarantor would take on the legal responsibility for the mortgage in its entirety if for some reason the borrower can no longer meet the payments.
What should you do if you are in negative equity?
If you are in negative equity, i.e if you cannot pay off your mortgage in full through the sale of your home, you may have to split the outstanding debt with your ex-partner or work to seek an agreement with your lender or your bank. You must consider this with your legal advisers and the relevant financial institutions.
Name not on property title deeds
Even if your name is not registered as an owner of the property, you may still have statutory matrimonial rights as both parties are normally considered to have an interest in a matrimonial home. It is advisable to seek the help of a solicitor to protect this interest if you are considering moving out. You should also seek advice if you are the legal owner and owned the property before your marriage, or if you think there may be other specific circumstances which would affect your interests in the home.
In every settlement, your individual circumstances must be considered so that you can determine what is best and right for you. Evaluating your financial situation is always of utmost importance.
Legal help at Parfitt and Cresswell
The experienced and compassionate team at Parfitt and Cresswell will make sure you get the expert legal advice that you are seeking to help you make an informed and legal decision for your home and mortgage as you transition into the next phase of your life. Contact us today for support and guidance.
