Whilst divorce is not the cheeriest of subjects, it is a sad fact that 42% of marriages end in divorce. If you are one of these couples you may believe that going your separate ways is a simple case of dividing your assets 50/50 but contrary to popular belief this is not necessarily the case.When it comes to divorcing a partner with whom you own a property, there are no set rules regarding decisions about the ownership after you have separated it depends on the individual case. Importantly, courts will give priority to ensure that any children as a result of the relationship have a secure home. If neither party is able to buy their partner out of their share of the property, there are several orders that courts may make, depending on what best suits the divorcing couple and any children, including;
- transferring the ownership of the home to one of you, perhaps with a lesser share of other possessions
- retaining the joint ownership but giving one party the right to stay, if there are children involved
- transferring the home to one party but with a charge secured on the property so that the other party receives a set percentage when the home is sold
- selling the home and splitting the proceeds between both parties in whatever proportions seem fair, so that you can both start afresh
Many of these options will inevitably require some changes to the mortgage contract. Therefore talking to your lender as soon as possible, should your situation with your partner change, is key to ensuring that agreed outcomes are met as efficiently and quickly as possible. This is particularly significant as whilst courts can order variants on the above, unfortunately they cannot force a lender to take a person’s name off a mortgage ultimately the lender needs to consent to the changes. In addition, if a court has ordered that ownership be transferred and your lender agrees, you and your partner still need to talk to the lender in order to have the transfer made. In many cases the lender will need you both to consent to the new mortgage contract in order for the action to be carried out.
Whilst court orders are applicable to those going through a divorce, having consent from the lender and from both individuals is equally important for unmarried couples who have a joint mortgage, and then later choose to separate. Whether married or not, if you have a joint mortgage with a partner, both names will be on the mortgage contract, meaning both parties are liable for the mortgage regardless of who remains in the property after the split.
If for some reason your partner does not agree to transferring or changing ownership of the property, then the court can order the consent for transfer. Similarly, if no changes are made to the ownership of the property and your partner finds that they are either unable to pay or becomes unwilling to pay their share of the mortgage after divorce, you may find yourself in the difficult situation of being pursued by the lender for a higher percentage, or all, of the mortgage payments. This situation is best avoided if at all possible; as well as impacting on your finances in the short term, if one person refuses to make repayments, this will affect the credit history for both ofyou, meaning you may not then be able to access favourable credit terms in the future.
The Future
It may be the case that your current mortgage provider does not agree to the transfer or change of the mortgage ownership, or you may be looking to apply for a new mortgage after a divorce or separation. In either case, you will need to carefully research which mortgages you have access to depending on your situation, as not all lenders consider all sources of income when it comes to affordability tests. For example, some lenders do not accept, or only accept a percentage of, child maintenance income. This is particularly important as, in 2012, 48% of couples divorcing had at least one child aged under 16 living with the family. In addition, with 2.8million households in the UK consisting of lone parents, it is clear that lenders refusing to consider child maintenance as part of affordability after a couple has divorced are limiting the the mortgage market for this group. Providing accessibility to mortgages after a divorce is part of our ongoing campaign to champion those who are often overlooked by mainstream lenders. We call this group ‘mortgage misfits’ and as well as divorcees it includes the self employed, contractors and older borrowers, as well as others who do not fit the ‘standard’ mould for mortgage applicants.
Ipswich Building Society is one of the lenders which takes into account 100% of child maintenance income in addition to full or part time employment. Furthermore, many lenders use national averages when taking into account spending for certain items such as transport, clothing and groceries whereas Ipswich Building Society does not. If an applicant can prove that they routinely spend less than the national average on these and certain other items, Ipswich Building Society will take this evidence into account. This is thanks to the Society’s standard practice of manually assessing each individual mortgage application by doing this, and not using computer based affordability tests, we are able to consider mortgage applications from a greater number of those looking to buy a property after divorce or separation.
During a relationship breakdown there may be financial pressures which mean you could go into arrears, even temporarily, which can affect your credit and future ability to obtain a mortgage. Above all it is important you speak to your lender as soon as you can if you and your partner wish to change your mortgage agreement, so that they can help you work out the best way to proceed. It is always better to speak up early if your situation looks like it is changing; we have trained consultants available for expert advice please get in touch if you would like to talk your situation through with one of them.
