How do we deal with our mortgage during a divorce?

Untangling the emotional threads of a relationship during a divorce is challenging, but unraveling the financial knots, particularly when it comes to shared assets like a home, can feel daunting.

The family home, a symbol of shared dreams and memories, suddenly becomes a pressing financial concern. With fluctuations in the economy and the ever-looming cost-of-living crisis, many separating couples find themselves pondering: ‘What happens to our mortgage now?’ Navigating this delicate terrain requires understanding, clarity, and timely advice. Let’s delve into the options and considerations you need to keep in mind.

With interest rates and the cost-of-living crisis in the headlines daily, mortgage affordability is a concern for many homeowners, not least for couples who are separating and wondering how this will affect their mortgage arrangements.

‘Most couples prefer to negotiate a clean financial break so that they have no ongoing financial ties, but if you have a joint mortgage, then you and your partner will be both jointly and severally liable for that mortgage until it is either repaid or transferred into one person’s sole name,’ says Diana Rose, a Partner in the family team with Borneo Martell Turner Coulston.

There are typically three ways in which a former matrimonial home will be dealt with when a marriage or civil partnership ends. Some couples may also need to take additional steps if their home is in a position of negative equity.

The three common routes are:

• Selling the former matrimonial home – If you decide to sell your home, an estate agent will be jointly appointed by you both to achieve the best sale price. Once the sale completes, the solicitor will redeem the mortgage in full, so that neither of you have any further obligation to the mortgage company.

• If you keep the house – If you are the sole owner of the house and the mortgage is already in your sole name, you do not need to take any action. Your divorce lawyer will be able to include terms in your settlement agreement to ensure your former partner is foregoing any beneficial interest they have in your house.

If your spouse or civil partner is the sole owner of the house, you will need to have the house transferred into your name. If you must pay them a lump sum as part of your settlement, or you have agreed to repay their mortgage on the house, then you may need to take out a mortgage in your sole name. Independent financial advice will be needed on the right option for you.

If the mortgage is in joint names, then you will either need to repay the mortgage and take out a new mortgage in your sole name, or, you will have to seek the agreement of your current mortgage company to release your partner from the mortgage and to transfer it into your sole name.

• If your spouse or civil partner keeps the house – If you are not an owner, then you do not need to do anything, and your settlement terms will confirm that you are agreeing to forego any beneficial interest you have in the house.

If the mortgage is in joint names and even if you do not reside in the house, you will still be jointly and severally liable for it. Until you are released from this liability, you may find it difficult to obtain a mortgage for any new house you wish to purchase. Therefore, when the house is being transferred to your former partner, your solicitor will make sure that you are released from all future obligations to the mortgage company.

How we can help

One of our family law experts will be able to advise you on the options available to you in respect of your mortgage on divorce. We can weigh up the routes available to you, and help you obtain the right legal and financial advice to best meet your future needs.

For further information, please contact Diana Rose in the family law team 01604 622101 or email diana.rose@bmtclaw.co.uk.

Borneo Martell Turner Coulston has offices in both Northampton and Kettering.

Call 01536 523434 or visit www.bmtclaw.co.uk