What happens to our mortgage if we’re divorcing?

It’s the start of the year! And that means lawyers are gearing up because it’s the busiest time for divorces in the UK.

While the first Monday in January is called ‘Divorce Day’, research by solicitors show that March sees the number of official separations spike. And they believe that while Christmas might be the catalyst, it can take a few months before couples decide to go their separate ways.

But what if you have a joint mortgage and are getting divorced? What are your options? We’ll take a look at what you need to know.

What happens to a mortgage if we’re divorcing?

Making a decision to get divorced isn’t easy. According to Psychology Today, it can lead to fear, shame, guilt and anger.

Even in cases where there have been many arguments, it’s still difficult to make the decision to separate after so much time together.

Worries over children, loneliness and finances begin to make life even more difficult. And if you have a mortgage and are about to get divorced, then this can add to those pressures. After all, who will ends up getting the family home? Or do you both need a fresh start?

Understanding what you can do will help take that worry away. Let’s look at what you need to know.

What about our joint mortgage?

Mortgage lenders don’t take sides! As far as they are concerned your divorce doesn’t affect your mortgage. Because you both signed documents when taking out the home loan, you’re both responsible for making mortgage payments.

And this won’t change until either the loan and interest is paid in full, or one of the names is removed from the mortgage.

If you miss any payments, remember that this will affect both your credit scores. And so it’s sensible for you both to keep making mortgage payments until things are resolved. Failing to do so could create issues for you both once you’re no longer legally wed!

What are our options?

As with any financial decision, there isn’t a single answer. It all depends on your individual circumstances. Here are the most popular options…

Sell up and pay off

If neither of you want to keep your current property (for whatever reason) then selling the it might be the sensible way forward. Depending on your loan-to-value rate, you may be able to pay off the mortgage and interest and any leftover money can be split between you.

Once this has been done, you won’t be linked to your ex-partner financially. Unless you have any other loans in both names.

While this appears to be the best option, remember that depending on your mortgage terms, there might be early repayment charges. Also, if you’re in negative equity – meaning your property’s value is less than the mortgage – then selling has more financial consequences. In this instance, you’d need to decide how to share the outstanding debt.

One person pays the mortgage

If one of you decides they want to stay put and can afford to pay the mortgage you can ‘buy out’ your ex-partner’s share. This includes their equity and you’ll need a Transfer of Equity.

But before you decide it’s the right way for you, there are potential issues. First, you may need to arrange a new mortgage or have your ex’s name removed from the current loan. The problem is that lenders may not agree to refinance you. To them, it’s more risky having one person taking out a mortgage than two.

There can also be additional fees in this situation. To remove someone’s name from a property means you need a conveyancing solicitor. So as well as a divorce lawyer, you’ll need to find funds for a conveyancer.

And if you get a new deal, you may have to pay early repayment charges on your current mortgage.

Keep both names on the mortgage

If your home loan is close to being paid off, then it might make more sense to keep both names on the mortgage. It might feel messy, but it can be better for both parties in the long run.

Once you sell your property, you can split any profit. Couples with children might prefer this route as it means one partner continues to live in the property without creating upheaval for your little ones. It may mean the person leaving cannot obtain a further mortgage, however. So, they will have to be happy renting until the mortgage and interest are paid.

Are there other options?

Divorce is messy! Sadly, that’s the case and no answer is the right one. As well as the mortgage, there are other financial commitments to consider, so the options we’ve mentioned might not work. For example, you may decide to continue living at your home and borrow money from a relative to buy out your ex-partner. Speak to a mortgage broker, like The Mortgage Dog, who can give you independent advice without judgment. Brokers can access loans and specialist lenders once they’ve looked at your circumstances that you can’t get on the high street.

What should we do next?

You should speak to a divorce solicitor who will take you through all the legal obligations and explain your options. If you then need mortgage advice, you can speak to your mortgage lender or your broker.

If you haven’t got a broker, our experienced team are happy to help. We’re always confidential and we won’t judge you. We just want to help you and your partner go your separate ways without worrying about your mortgage.

Contact us today to make an appointment either in person, online or over the phone.

You may have to pay an early repayment charge to your existing lender if you remortgage. Your home may be repossessed if you do not keep up repayments on your mortgage.