Make repayments a priority
The most important thing to remember while handling your mortgage throughout your divorce, is to continue making your repayments – even if you are no longer residing at the property.
When you and your ex-partner are both named on the mortgage, you are both still responsible for keeping up with the repayments throughout your term. Until the mortgage is paid off, or one of you is removed from the mortgage and title deeds, you are both still liable for the repayments.
Failure to make mortgage repayments could result in the repossession of your home, as well as damage to your credit history. It can also have a lasting effect when re-applying for a new mortgage in the future too.
It is important to notify your mortgage lender of your new circumstances as soon as it is convenient.
What are my options?
Going through a divorce whilst you have an outstanding mortgage together is a process which can cause distress and upset. However, it is a process which sadly happens every day. In order to achieve a resolution for those involved, you have a few options to consider which allow both parties to move on after the divorce:
- Sell the property to pay off any existing amounts left on the mortgage term. Both parties will move out of the property into alternative housing.
- The mortgage can be transferred into one partner name – on the basis they meet the requirements from the lender and can keep up with the repayments throughout the remaining term.
- If the remaining mortgage balance is low and the divorce is amicable, you could look at continuing to pay the mortgage between parties and split the proceeds afterwards. The options above are all achievable with both mortgage and legal advice, which is encouraged to be sought out when dealing with your mortgage as a result of divorce.
Selling your home as a result of divorce
Selling your home as a result of a divorce is an option to consider, even if there is a substantial amount left to repay on the mortgage term and as long as both parties are happy to move out of the property. The sale of a house can be a lengthy one, so if both parties are amicable and on speaking terms - it can make things easier.
Some couples opt to sell their home before a divorce settlement, however it can work out better to wait until afterwards. If you are able to continue being on civil terms until after the settlement has been reached, it then allows time to decide how best to divide the funds from the sale as well as agreeing on terms going forward.
Transfer of Equity
There are various ways to have a transfer of equity. Either you can buy your ex-partner out of your joint mortgage, or alternatively have them buy you out. The following ways will result in you having full ownership of the home:
- If your property is mortgage free and you or your ex-partner intend to stay in the home once the other has moved out, you are able to reach an agreement where the party leaving the property is paid a lump sum of money based on the share of the property. Once this has been settled the ex-partner who opted to leave the property will immediately be removed from the title deeds, leaving the remaining member sole owner of the home.
- The option to remortgage in a sole name is also one to be considered. The remaining partner on the mortgage will be required to go through a series of checks and questions around income and expenses by both the lender and mortgage advisors, to ensure they are suitable and eligible to cover the cost of mortgage independently. If the remortgage application is successful, the ex-partner leaving the property will be removed from the deeds.
- If the partner who wishes to remain in the property is unable to afford the mortgage as an independent, they are able to seek a Guarantor Mortgage. A Guarantor Mortgage is where a close relative, or in some cases the ex-partner, agrees to be a guarantor for the mortgage payments should a situation arise where you cannot cover the monthly payments. If this route is one you are looking to go down, the guarantor will be advised to seek mortgage and legal advice before going ahead with the agreement, as they will become solely responsible for the mortgage should anything happen.
Buying a new home and getting a mortgage after a divorce
It may not be the first thing on your mind, but buying a new home and getting a new mortgage is viable following a divorce.
Your financial situation is likely to have changed as a result of divorce, and your eligibility for your new mortgage will depend on this. Mortgage lenders will require information about your new financial circumstances, and they will also consider many factors, such as your income and personal circumstances, just like they did when you applied for your first mortgage. There will also be questions around any maintenance due to be paid or received.
To find out how much you could be eligible to borrow, you could talk to an independent mortgage broker who will be able to offer advice.
How Choice Mortgages can help
Selling your home due to divorce is a difficult situation to find yourself in, but sometimes life throws us curveballs which we least expect.
Here at Choice Mortgages we want to help make the process a little more bearable for you, making it less stressful by providing expert advice to support you along the way in order to achieve the best outcome.
If you are going through a divorce and would like some mortgage advice, we are here to assist you. If you require advice about your current mortgage due to divorce, or you may be looking for a new mortgage after your divorce, speak to one of our mortgage experts today.