Understand how to handle your mortgage during a divorce to determine your best options and be prepared at best.
Divorce is certainly something you don’t plan for in advance when purchasing your first marital home together but, unfortunately, it’s a common occurrence. This is why we advise you to have a discrete conversation with your mortgage broker. This is essential to help you handle your mortgage during a divorce.
If you are going through or thinking about divorce and have a joint mortgage, you might feel more worried about the process as you are not sure what to do with this joint commitment. Don’t worry, there are options around this but it’s important for you to speak with the right professionals. They will make sure you are proceeding with the best solution for your circumstances and handle your mortgage during a divorce at best.
There are two things that can usually happen when a couple is going through a divorce and jointly own their home:
- Sell the property
- Keep the property under one name only, buying the partner out
SELLING YOUR MARITAL HOME DURING/AFTER DIVORCE:
A lot of couples decide to sell their marital home as they go through a divorce. This will allow them to keep their share from the proceeds of sale to start a new chapter of their lives.
If you are going down this route, it is important you prepare yourself in advance to know how much you will be entitled to receive from the divorce settlement. Only after doing this you will know what your budget will be for your new home based on the mortgage you can obtain from the bank.
It’s vital to speak to a mortgage adviser to establish how much you could borrow from the bank. This will help your lawyer determine how much you will be entitled to receive from the sale of your marital home. It’s not always a 50/50 split, at times this will be split in unequal shares especially when there is one partner earning significantly less than the other. Speaking to a qualified mortgage adviser will help you even at the start of your divorce journey, where you are coming to an agreement on how your joint ownerships will be divided.
KEEPING YOUR MARITAL HOME AND BUY OUT YOUR EX-SPOUSE:
Some couples, instead of selling the marital home, may decide to keep it just under one name. Couples may decide to do this when they have children and want to allow them to grow up in the same environment. This will allow them to stay in the same schools, in the same neighborhood and in a home that they have always known to be theirs.
To do this, one of the partners needs to be bought out of the property. This means removing their name from the mortgage and title deeds of the dwelling. If you are looking to do this, you will need to pay them the equal of their share in the property. This is the case when they have been contributing to the mortgage monthly payments, deposit and/or renovation costs of the property.
By doing this, you might need a higher mortgage to borrow additional funds to cover the share of your ex partner. This means your monthly payments will also increase as a result of increasing the amount of your mortgage. Speak to an adviser to determine if this can be affordable.
It’s important to speak to a qualified mortgage adviser to establish the following:
- How much can you afford to borrow on your own salary?
- Will you have any penalties to pay to change the terms of your mortgage?
- Can you afford to pay these penalties and borrow the amount needed to buy your ex partner out?
- Is there enough equity in your property to raise additional funds to buy your partner out?
You can decide to buy your partner out and be the only person named on your mortgage. Alternatively, you can decide to add another person to the mortgage. How you will proceed will depend on your circumstances and needs, speaking to a mortgage adviser will be key to determine the best route for you.
It is important to remember that until you have either sold the marital home or bought your partner out, you will both be responsible for keeping up with your mortgage payments on the property. It is therefore important to make sure the lender receives their monthly payment to avoid any repercussions on your credit reports and, as last result, to avoid repossession.
If your partner is refusing to pay for their part of the mortgage payment and you can’t cover the whole amount on your own, we highly advise you to contact your lender to make them aware. They might be able to offer you a short term solution until you get your finances in order and establish your divorce settlement.
We can handle your mortgage during a divorce to achieve the best possible outcome for you.
Contact us via email/phone call or drop us a message on WhatsApp.