A divorce usually results in significant upheaval in life and multiple changes, especially regarding finances and property.
Nobody wants to go through the turmoil of a divorce, but divorces happen all the time. In 2022 alone, over 80,000 divorces were granted in England and Wales.
This shows the unfortunate truth that divorces, while not desirable, are common. And property issues related to divorces are equally common.
In such a situation, understanding your options is crucial. Should you go for shared ownership or look to buy out your partner? Or could you consider selling the property altogether?
There are many options you can look at, and today, we’re going to explore what you need to know about navigating mortgages after divorce.
Let’s get started.
Table of Contents
The Truth About Mortgages And Divorce in The UK
For most couples in the UK, their home is their biggest asset, and deciding what to do with the mortgage on a home is one of the biggest concerns during a divorce.
The entire process can be complex and take a significant emotional and physical toll on both parties.
When things are going well in a marriage, couples usually take out joint mortgages to finance their home if they don’t have one.
However, when the time for divorce comes, they must explore how to deal with that mortgage.
While a joint mortgage doesn’t prevent you from getting divorced, both names will remain on the agreement.
You and your ex-spouse will be responsible for repaying the mortgage until you enter an alternative financial settlement.
When you plan to get divorced, it’s vital to inform your lender immediately about the matter and discuss your options for dealing with the mortgage payments.
In many cases, lenders might offer you an extension of the term or a repayment holiday to help you in the short term.
The most significant aspect is that you keep your lender informed and continue making the monthly repayments, even if one of you has moved out.
Payment failure might result in repossession of the property, which nobody wants.
Who Pays Mortgage After Divorce?
As mentioned above, both parties remain legally bound to pay a joint mortgage even after divorce.
While we understand that this is a time of emotional toll, it’s important that you keep up with your mortgage repayments while working through the divorce.
You should also work towards entering a formal agreement with your spouse regarding the payments, as they might refuse to keep up with the repayments later. If the latter happens, immediately speak to your lender and discuss your options.
The above situation deals with joint mortgages where both spouses are party to the mortgage agreement.
In a solo mortgage in one spouse’s name, that person is solely responsible for repayment. However, as per family law, you might need further legal aid if the other partner has a financial stake in the property.
In many cases, the court might issue a Martin Order or a Mesher Order dictating how the property should be managed after the divorce.
Whatever the case, keeping your mortgage lender informed about every step is vital, as they can provide much-needed guidance or finance options.
How To Refinance Mortgage After Divorce
Refinancing a mortgage after divorce can be beneficial for both parties, as it provides more clarity on the situation.
Whether one of you wants to keep the property or you decide to sell, refinancing can be helpful. Given below are the general steps to refinance a mortgage after divorce:
1. Financial Assessment
Suppose you keep the property and get a solo mortgage in your name.
In that case, considering all incomes and expenses, you need to assess your financial situation to understand if you can afford the solo mortgage.
You can get help from our online mortgage affordability calculator to determine this yourself.
2. Understand Your Equity
Equity is usually calculated as the difference between the property value and the outstanding mortgage.
Equity is generally divided based on court orders or mutual agreements when you’re getting divorced. You must calculate the required payout if you plan to buy out your ex’s share.
3. Select A Refinancing Option
Next, you need to select a refinancing option that’s suitable for you. You can either go for a transfer of equity and take full solo ownership of the property through remortgaging, or you might take another loan to buy out your ex’s share.
4. Seek Legal Aid
Working with a legal and financial advisor when refinancing a mortgage after divorce is best. Since these legal matters can often be nebulous, having a professional who can help you is best. Further, legal aid is vital to protect your interests if your divorce is not mutual.
Refinancing after divorce allows both parties to reach a state of financial stability, but it requires significant planning. Make sure you proceed with all the information before making a decision.
How To Get Off A Mortgage After Divorce
Getting your name off the mortgage agreement after divorce is essential if you don’t want to be responsible for the property or payments.
The process must be completed through a legal agreement between both parties and the lender.
This is usually done through a Transfer of Equity, in which the ownership of the property is transferred solely to the other party, which is your ex-spouse in most cases. You can also arrange for the property to be sold, use the proceeds to pay off the mortgage and divide any existing equity as per your divorce settlement.
In either case, work with a legal professional to update all associated documents accordingly.
Also, it’s vital to keep your lender informed every step of the way since they are responsible for removing your or your ex-spouse’s name from the mortgage agreement.
Frequently Asked Questions
1. In a joint mortgage, do both parties have to agree to sell the property?
If an associated party wants to sell and the other doesn’t, the former can institute a Division And Sale action and move to court. The other party can then appeal to the court for a division of the proceeds or for purchasing the property at its present market value. The court can sanction the sale if the other party is indisposed due to medical causes or cannot be located.
2. Can my name be taken off the mortgage agreement without my permission?
No, it cannot be taken off without your expressed permission. When the property and mortgage are jointly agreed upon, your signature is needed to remove your name from the agreement.
Our goal is simple – to provide most up-to-date and accurate mortgage information to make your mortgage journey as stress-free as possible. Have a question? Fill up the quick form and one of our mortgage advisor will connect with you.
