What Divorce Means For Your Mortgage

Going through a divorce when you have an outstanding mortgage with your partner can be a big worry - knowing what might happen to your home can make it less stressful. Here's a rundown of your possible options.

More and more people are splitting from their spouses or partners - in fact nearly 50% of marriages now end in divorce - and when they do the fate of the family home can be a highly emotive subject.

Not only does the property represent a significant financial investment but it may also be the home where children have been raised and the family based over the years.

Exactly what happens to your mortgage will largely depend on your plans for the property and your individual circumstances.

Paying the mortgage

If you are going through a divorce and have moved out of the family home you may wonder if you need to keep paying the mortgage.

It's worth remembering that when two people take out a joint mortgage both are agreeing to be equally liable for the debt for the duration of the mortgage, not just while you live there.

In other words both you and your partner are responsible for ensuring the mortgage continues to be paid, and as a result any failure to pay on time will damage you and your partner's credit history.

This situation can sometimes lead to one person refusing to pay; threatening to do this can ultimately backfire if a court has to make a ruling on the divorce at a later date.

Contact you bank

As soon as you know you will be separating you should contact your bank - especially if you think you may struggle to meet your mortgage payments until the divorce is finalised.

Due to the frequency of divorce and separations most banks are more sympathetic than in years gone by and may even be willing to offer payment holidays to couples going through a separation.

While this can give you some breathing time while dealing with the initial separation, the original mortgage agreement will still be in place and a long term solution will need to be reached.

Your options

Going forward there are usually 3 broad options for couples with a mortgage;

1. Sell up and Move out

If both you and your partner will be moving out of the property then often the easiest way to move forward is to sell the house and pay off the mortgage.

This can provide a clean break and be the least messy way of moving on after a separation.

In these circumstances any equity left after the mortgage has been paid off will be considered a marital asset and split between the two of you.

Exactly who gets what from the leftover funds can be open to dispute, often the quickest (and cheapest) way is to reach an agreement between the two of you about who gets what.

If you can't reach an agreement then the matter would be need to be settled in the divorce court, where you would need to seek legal advice on your rights.

2. Keep the property & Buying out the other party

If either you or your partner intends to live in the home then chances are you will need to come to a solution that transfers ownership to the occupier.

Transferring the mortgage into one name will involve one partner buying the others share in the property, including their share of any equity involved.

The first hurdle you'll face is proving that the occupier will be able to afford the mortgage on their own - remember the existing lender is under no obligation to remove either of you or to transfer the mortgage to one name.

However, if you can satisfy your lender that you can afford the mortgage then chances are that they will agree to you becoming the sole mortgage holder.

You will then need to buy your ex-partner's share in the property before the mortgage can be put into your name - this may involve getting the current value assessed to determine the level of equity in the property.

Again if you need to borrow money to fund purchasing your partner's share you would need to prove that you could afford the additional borrowing.

Moving your joint mortgage into just one name can provide the same financial break as selling up while keeping ownership of your existing home.

However there are several obstacles to overcome and if there is some dispute over the value of the property or the level of equity due to your partner you could find yourself in court to negotiate a settlement.

3. Continue Paying Existing Mortgage

In some circumstances you may decide to continue paying the existing mortgage, especially if you don't have long left and the divorce is on good terms.

If you are considering this option you would need to ensure that both you and your partner can continue to afford to pay the mortgage and any other living costs.

This may also be a good option for the mid-term if you mortgage is fixed for a number of years and would mean you'd pay high mortgage charges to move elsewhere.

Negative Equity

If you are facing a divorce while your joint home is in negative equity then your options are likely to be restricted due to your inability to sell the home to pay off the mortgage in full.

In this situation you should speak to your mortgage provider to discuss your options, it may be that you will have to split the outstanding debt between you or come to an agreement with your mortgage provider.

Remember unless you act the joint mortgage will remain in place which will hold you equally liable for mortgage repayments.

Again if you are uncertain you should seek independent legal advice.

Seek Advice

Each of these solutions can appeal to separating couples in different circumstances, for example if there are no children involved then selling the property and cutting your losses may prove the best option.

However if property is the family home then either you or your partner may want to continue living there to reduce the impact of the divorce on your children.

Whatever option you are considering, you should seek independent advice on your circumstances; there are several charities that can explain what you will need to do and point you in the direction of legal advice if required.

No name on the Deed?

If you are separating from your partner and your name is not on the mortgage or deed of the house that does not mean that you have no rights or claim on the property.

When it comes to divorce in the UK the matrimonial home is considered a joint asset and you cannot be forced to leave by your partner.

If your name is not on the mortgage or deed you can register your matrimonial rights through the Land Registry to stop your partner selling without your consideration.

However, it is worth noting that if your partner owned the property before your marriage then you'll have little legal claim to it when it comes to divorce proceedings.

If you find yourself in this situation you should seek legal advice to determine exactly where you stand.

Disagreements & Legal rulings

Ultimately if your divorce has not proved as amicable as you had hoped and there is some dispute over who is entitled to what then you may be faced with going to court.

You should be aware that very rarely is it a case of a simple 50/50 split when divorce proceedings head to the courts.

Courts take into consideration a wide range of circumstances when making a decision on what happens to the marital home.

If there are children then their well-being will be the primary concern of the court, they will also consider both parties' financial circumstances when making a decision.

If your divorce has reached this stage then you will need to seek independent legal advice, while this can be a time consuming and expensive undertaking, it is the only realistic option you have when faced with a trip to court.

Remember to consider other financial assets

From an emotional perspective the fate of your home is likely to be at the top of the agenda when it negotiating a divorce, however you should also consider what will happen to other financial assets as well.

Most people believe the home represents their biggest marital asset, yet depending on age and individual circumstances pension funds that you have built up over the course of your marriage may actually be worth more.

It's important to take these other assets into account when discussing the fate of your marital home.

For step by step information on coping with the financial impact of divorce or separation take a look at our guide: How to get a fair financial divorce settlement.

Source:- http://www.money.co.uk/article/1006150-what-divorce-means-for-your-mortgage.htm

What Are The Chances Of Me Keeping The Family Home

My husband and I are getting divorced, what are the chances of me keeping the family home - and what do we do if I can't?

I am separating from my husband and at present I live in the family home with our two younger teenage daughters, the eldest is at university and only comes home during holidays.

What are the chances of staying in the family home with my children? I am working and as I do not need to pay for childcare I would just about be able to afford the mortgage. However, the house is our only large marital asset. 

If, as part of the split, it has to be sold would there be a capital gains liability, as this would affect how much equity both of us would receive? If I have custody of the children will I be entitled to a larger share? T.A via email

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Dispute: At the heart of most bitter divorce cases is the problem of money

Linda McKay of This is Money replies: At the heart of most bitter divorce cases is the problem of money. 

If you can come to some agreement over this early on you can look forward to a more amicable future relationship for yourself, your daughters and their father. 

I asked one of our legal experts for insight over your concern for the family home.

Robin Charrot, family partner at national law firm Mills & Reeve, replies: You won't be able to stay in your home forever, but you might be able to do so while your daughters still live with you.

Firstly, try asking your husband to agree to postpone any sale until your daughters have left home. If he has their interests at heart, and if you approach him in the right way (I would recommend mediation or collaborative law), he may well agree.

More...

• How to get divorced without the big bills
• Need legal advice? Find a solicitor near you
• Will writing service: Get advice on what will happen after you die

If he doesn't, you will need to convince a judge that postponing the sale is the best way of providing a home for your daughters until they leave. If your home is not too big (a three bed semi-detached or smaller), or if you can show that right now you can't afford to sell, split the equity and buy a big enough house for you and your daughters, you have a good chance of winning.

If the sale is postponed, there will be extra issues to sort out, like, when exactly is it going to be sold?
Who benefits from you paying the mortgage? Who pays for maintenance or repairs? Who benefits from increases in value?

You shouldn't have to pay capital gains tax, assuming your home is your principal private residence. 

If the sale is postponed for a long time, your husband might have to pay some capital gains tax.

You are not automatically entitled to a larger slice of the equity just because your daughters are living with you. 

After all, your husband should be paying you child maintenance. However, there are other reasons why you might get more than half; for example, if you are entitled to claim maintenance for yourself but instead take a larger share of the house, or if your husband keeps more than half of other assets such as his pension.

Linda Mckay adds: You may want to seek independent legal advice alone before going into mediation with your estranged spouse.

Equip yourself with knowledge of all the legal rights you may have then expect to compromise. 

Flexibility over financial arrangements and custody and communication are key to smoothing the separation.

Source:- http://www.thisismoney.co.uk/money/experts/article-2632816/I-getting-divorced-chances-keeping-family-home.html

Splitting up what you own during divorce

When dividing things up during divorce or dissolution, you can reach agreement on your own or use the courts. This article offers an overview of things to consider when deciding which option is for you and provides links to further information.

The basics of splitting up what you own

In England, Wales and Northern Ireland, everything you own can be taken into account as part of the overall divorce or dissolution settlement. However, some assets, such as money or property you have inherited, may not be treated the same as those that you’ve bought or earned.

The basics in Scotland

In Scotland, generally, only assets you have built up during the time you have been married or in a civil partnership are taken into account. However, if you owned previously an asset which changed form during the marriage or civil partnership, then it may be taken into account. You may be able to argue for an unequal division of the matrimonial property to take account of the pre-marriage value of it. If a house was bought before the marriage with the intention that it would be the family home, then it will be taken into account.

Agreeing how to split your assets

If you’re married or in a civil partnership you may decide to agree between you how you divide money and assets you own (such as property and investments) or you can go to court. If you decide not to go to court, you can use a professional adviser, such as a collaborative lawyer, an arbitrator, a family lawyer or a mediator (a professional skilled in helping people to negotiate with each other) to help you reach an agreement.

If you want to decide between you how your assets and any debts you have will be divided, you should get a court order drawn up, which is a legally binding agreement, otherwise your spouse or civil partner could make another claim against you in the future. In Scotland, this is known as a separation agreement. To ensure that your ex-partner cannot make another claim against you in the future, you should seek professional help regarding your separation agreement.

• Read our guide Get professional help with your divorce or separation

Dividing up your assets

If you don’t want to go to court, you will need to decide how to divide assets you own jointly (such as bank accounts or joint investments) and those you own individually (such as savings or a pension in your own name).

Family home

There are different ways that you can divide the family home if you own it. One partner can buy the other out or you can sell up and split the proceeds – either equally or in unequal shares. How you split the family home will depend on factors such as the size of any existing mortgage, how big the mortgage is compared to the value of the property and how much each of you earns. If you rent, there are rules around who is liable to pay the rent during a divorce.

In Scotland, the overall value of the matrimonial property, any children and how the ownership of the remaining matrimonial property is constituted are all factors which would be considered in a decision regarding division of the matrimonial home.

Find out more about your options in:

• What to do about a mortgage during separation
• What to do about the home you rent during separation
• Your home and your divorce settlement

Bank accounts

You should decide how and when to close down any joint accounts you have. If you have money in a joint account, it’s normally assumed to belong to each of you 50:50, no matter who paid it in if you live in England, Wales or Northern Ireland. In Scotland, if the money is in a joint account, then it becomes joint property which may mean that it should be divided unequally to take into account the ‘source of funds’.

Investments

Some investments, such as shares, can be owned jointly. Take advice if you are thinking of cashing in your investment so you can divide them between you.

If you own buy-to-let property jointly, you will need to get it valued and to work out whether you want to continue renting it out. Contact your lender if you want to take your ex-partner’s name off the mortgage and consider talking to a mortgage broker if you think you will need to remortgage. If one of you owns it in their name alone, it may need to be sold or transferred as part of the divorce or dissolution settlement.

Pensions

There are several different ways that a pension can be divided on divorce or dissolution. It’s a complex area and you may benefit from the help of an expert. Find out more about the ways a pension can be split. 

• Read our guide Splitting pensions during divorce

Businesses

Valuing and dividing a business can be difficult, especially if it’s privately owned (which many small businesses are). It’s best if you and your ex-partner can work out how much the business is worth through straightforward disclosure. However, you can talk to an expert, such as an accountant, if you cannot agree.

In Scotland, if one party owned or had shares in a business before the marriage or civil partnership and this situation did not change in form throughout the union, then they would not be taken into account. However, if there was any change in the form of that business/ those shares, then they would be taken into account. If there is a business owned pre-marriage or civil partnership that may have changed form, then it would be advisable to consult a solicitor as this is not a straightforward area of the law.

• Read our guide Sorting out a business during divorce

Source:-  https://www.moneyadviceservice.org.uk/en/articles/splitting-up-what-you-own-during-divorce