How Does Divorce Affect Our Mortgage?

14 Jun 2024 | Lisa Pepper
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Table of Contents

Can you keep a joint mortgage after divorce?

From a mortgage lender’s perspective your divorce does not affect your mortgage. If both you and your spouses names are on the mortgage, then you’re both responsible for making the mortgage payments until the mortgage is paid off, or one of you has their name removed.

Missing payments can negatively affect both of your credit scores; it’s therefore important to keep up the payments and come to a long-term resolution as soon as possible.

Have a look at your mortgage agreement to understand your obligations to the lender early on. It’s also worth checking the Lang Registry’s records about the property – you can obtain these direct for a small charge. You will be able to see who the mortgagee is, and you may want to check if there is a Restriction about how you hold the property, whether as Joint Tenants or Tenants in Common.

What are the options for managing the mortgage in a divorce?

There’s no simple answer to that question as it depends on your family’s situation. There are several options for dealing with the family home, and each one has a different impact on the mortgage.

Sell up and pay off the mortgage

This is often a very tough decision to make and you and your spouse will need to weigh up carefully if this is necessary. The costs of selling the home and purchasing two new homes, will eat into the family’s capital. However it may, unfortunately, be the only option.

Any sale proceeds left over after paying off the mortgage will be regarded as a matrimonial asset, and divided between you fairly. Exactly who gets what is up for negotiation. A divorce solicitor can help you reach a fair division of the sale proceeds and negotiate this using Non-Court Dispute Resolution; or failing that the matter can be decided by a court.

If you’re in negative equity, meaning the mortgage is higher than the value of your home, then selling comes with even more financial consequences. You’ll need to reach an agreement about how you will share the debt as part of the financial settlement.

Buy out your ex and refinance

If one of you wants to keep the home and can afford to take on the mortgage on their own, then buying out their ex-spouse’s share—including their equity—is an option. This is called a Transfer of Equity. One of you agrees to come off the property title, either for cash (this may require additional mortgage borrowing) or other assets to the same value.

The drawback to this approach is the person keeping the home must arrange a new mortgage, or have the existing lender agree to remove their ex-partner from the mortgage—and the lender is under no obligation to agree to any refinancing and could well levy fees or say a new mortgage product (on a higher interest rate) would need to be applied. They’ll go from having two people on the mortgage to having only one, which is a riskier position for the lender. They will put the applicant through strict lending criteria to make sure they can afford the additional borrowing on their own.

It’s recommended you speak with a financial settlements specialist before going down this route. How much you can borrow, and whether you can afford the monthly payments, will help you assess what you propose you and your spouse can do with the property. It may also have knock-on effects for the rest of your family finances. If there is some dispute over the property’s value or how much equity your spouse is owed, for example, our experts can assist you to come to an agreement about that.

There may be additional fees involved in this approach. Taking someone’s name off a property requires a conveyancing solicitor in addition to your divorce lawyer, and as mentioned above, you may have to pay a mortgage exit fee or arrangement fee for the new mortgage.

Defer the sale until a future date

There’s nothing to say you have to change anything right away. Some couples decide to keep a joint mortgage and responsibility for the mortgage payments after the divorce. This can be the situation if you have children and wish to cause them as little disruption as possible.

With this option (if agreed), your solicitor can arrange for a Mesher Order to be set up through the courts. A Mesher Order says that you can’t sell the home until a certain date or trigger event, for example:

  • The youngest child turns 18 or completes their secondary education.
  • The last of the children leaves home for university.
  • The person living in the home remarries or starts living with a new partner.

At this point, the property would be sold and the sale proceeds divided between you (whether equally or however you have agreed to share them). It’s essential to seek legal advice when considering a Mesher Order, as it involves complex decisions about mortgage payments and eventual selling procedures.

Keeping things as they are provides stability in the short-term. However, you will need to think carefully about whether it is the right option for you in the longer term.

Delaying the sale of the home means your money stays tied up, potentially for many years. It may be difficult to set up a new household without that equity. Even if you can afford to buy a second home, it can be harder to get another mortgage, and there may be capital gains liabilities if you buy another home as your primary residence.

What if we cannot reach an agreement?

Options such as negotiations though a solicitor, mediation and collaborative law can help you reach an agreement about the family home, or if you need someone to give you a joint indication of what is fair, without it being a binding decision by a Judge, you can explore a Private FDR. Bear in mind there is a third party involved in all of this—the lender. They will have their own rules and criteria for mortgage borrowing, so it’s important to know what is realistically achievable before you come to the negotiating table.

If those options do not work, then the court can decide for you. The court will look at your finances as a whole to determine a fair division of all the assets, including your family home.

In cases with young children, their needs and welfare will be the first consideration for the Judge.

The Judge will want to know what you can both borrow (‘mortgage raising capacity’) and what your proposals are with regards to where you should both live – you would therefore produce property particulars to the Judge of local suitable properties where you can still commute to work and the children can go to school.

Ultimately, going to court is a riskier option than deciding between yourselves, since there’s no guarantee you’ll get the outcome you want. It is an adversarial process and can take a year or more. In the meantime, you and your family are living in that uncertainty.

Get expert advice and support

An expert divorce solicitor can help you negotiate your home, and the mortgage burden on it, in a way that is fair and acceptable to both parties. Our team is on hand to help you find the best route forward.

To speak with one of our solicitors, contact us by:

  • Filling in our online enquiry form; or
  • Calling us on 020 7485 8811

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