How a divorce affects your mortgage

John Fitzsimons
by Lovemoney Staff John Fitzsimons on 30 December 2012  |  Comments 15 comments

If you have a joint mortgage with your now ex-partner, it's not always clear what you should do. Here's everything you need to know.

How a divorce affects your mortgage

With almost four in ten marriages ending in divorce, the problem of what to do with a property bought on a joint mortgage is a fairly frequent one. However, there is not a wealth of information out there to guide property owners on what happens next.

D-I-V-O-R-C-E

Once the relationship has come to an end, there are two options. The obvious option is to sell the property, split the proceeds and go your separate ways.

However, if you have put a lot of time and energy into decorating and developing the home, this may be too much of a wrench.

So what is the process if one of you wants to buy out the other partner and keep the house?

Reapplying for that mortgage

The first issue surrounds the partner who wishes to remain in the property. Let's call her Lucy. Lucy will have to prove to the lender that she is capable of covering the mortgage payments on her own, without the help of her ex, Peter.

Is it essential to use an estate agent when you sell your home? We speak to Sarah Beeny and estate agent, Philip Bullman to get both sides of the argument.

This is really important, because the lender is under no obligation to remove Peter from the mortgage deed unless Lucy can demonstrate to the lender that she can afford the repayments alone. The lender will assess Lucy as if she were a new applicant, and decide whether the mortgage is affordable on her income alone.

Unsurprisingly, this is where many cases fall down, as not all lenders will take into account things like maintenance payments when judging the applicant's affordability.

Even if Lucy can afford the current mortgage on her own, she may also need to request a larger loan in order to buy out Peter's equity in the property, if she does not have sufficient savings. Again, the lender can refuse to lend this sum, if it decides Lucy could not afford a larger mortgage. 

Transfer of Equity

If the lender does agree, a 'transfer of equity' - alternatively known as a 'transfer of mortgage' - will need to take place. The good news is that your current mortgage deal can usually stay in place.

Related how-to guide

Sell your home

If you want to obtain the best possible price when selling your home, then these ideas should help.

In order to buy out your partner's share of the property, you'll have to get a valuation. This may be done on a drive-by basis, rather than a physical survey, though there is a financial sting in the tail, as a full valuation fee will most likely be charged.

An alternative option is to simply remortgage, particularly if your mortgage is free of any early repayment charges, as the transfer can take place at the same time.

While you would still face the costs of the 'transfer of equity' - which is generally around £200 plus VAT - the survey and other remortgage fees would be free, as with other remortgages. Remortgaging is also likely to be quicker.

The final option is that of a guarantor mortgage, which would require you to find somebody - most likely a parent or sibling - to guarantee you will be able to meet your mortgage payments. Then, if you don't meet your payments, the lender could start proceedings against your guarantor to recover your debt from them.

Speak to your lender

As always when your financial circumstances change for the worse, it is vitally important to speak to your lender as soon as possible. They should be able to talk you through your options and advise on the next course of action.

Lenders are becoming more sympathetic to divorce cases, and may provide a temporary payment holiday while you sort through the situation.

It may also help your case if you have drawn up a full budget to demonstrate you can afford the extended mortgage repayments.

Yorkshire Building Society previously offered the Fresh Start mortgage range, aimed at divorcees, which recognised the fact that repayments may need to be minimal for a while after a break up. It offered a mortgage deal fixed at 0% for six months, rising to a fixed rate of 7.29% for five years thereafter.

However, this range was pulled last year, meaning that there are now no specialist mortgages designed for divorcees. Instead, you will need to speak to your individual lender to see if and how they can help.

If you'd like to get professional advice, speak to a mortgage broker. They should be able to guide you through the process of removing your partner from the mortgage. We have our own expert mortgage team here at Lovemoney who can help guide you through the process for your own circumstances (and best of all they won't charge you a penny!)

This is a lovemoney.com classic article originally published in May 2009 and updated.

More on family finances:

Roosterbank, PKTMNY: pocket money goes online

Cut the cost of a private tutor

The top 20 places for families to live

How to renew your Tax Credits

How to claim your Tax Credits

How to untangle joint finances

Pre-nuptial agreements: rise of the pre-nup

The importance of arranging Lasting Power of Attorney

At lovemoney.com, you can research all the best deals using our online mortgage service, or speak directly to a whole-of-market, no-fee lovemoney.com broker. Call 0800 804 4045 or email mortgages@lovemoney.com for more help.

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Comments (15)

  • helen9797
    Love rating 0
    helen9797 said

    Hi

    Not sure if anyone has answered this. I split with my ex 4 years ago, he moved to Australia leaving me with the mortgage for 120K and the house. Our incomes individually when taking out the mortgage were almost exact.

    I have managed to fight through and am repaying all the mortgage myself but a couple of years ago my mortgage lender was not interested in me having the mortgage fully in my name even though my ex was ok with signing the house over to me.

    I have proven for the last two years also that I have been able to pay this myself. I also have a new partner however combined we do not meet the joint income that myself and my ex had. Is there anyway I can take the ex off the mortgage (now at 111K), he is willing without any equity being given to him and replace with my new partner or would this be a remortgage or a brand new mortgage application?

    Where do I stand legally also?

    Any help would be great.

    Thanks

    Helen

    Report on 25 June 2012  |  Love thisLove  0 loves
  • Caili
    Love rating 0
    Caili said

    How Liable am I for my ex husbands mortgage payments?

    My ex and I are now divorced after 5 years separation. when he inititially left we were sharing the mortgage payment but since our divorce he has paid nothing and I have been paying the total amount.

    I have been trying to get him removed from the mortgage as he has now remarried and I wish to stay in the house however neither our current lender nor anyone else will give me a mortgage on grounds of affordability despite my having serviced the payments for 9 months with no arrears

    I am now forced to sell the house but want to know if I am within my rights to reduce my payments on the mortgage now that the lender wont give a mortgage on my own and suggest they approach my ex for half the payment.

    Will the house be re- possessed?

    can he be forced to pay his half?

    Report on 06 September 2012  |  Love thisLove  0 loves

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