What are your mortgage options after separation or divorce?

What are your Mortgage Options after separation or divorce?

 

What does divorce mean for your mortgage?

According to the Office of National Statistics over 40% of marriages end in divorce, so if you are going through separation or divorce it isn’t unusual.

In fact, 13 people filed for divorce on Christmas day 2018…

 

Before you consider these options, it would be good to have the following information:

  • An estate agents valuation of your home .
  • An up-to date balance of your mortgage loan.
  • Ask your lender if there are any penalties if you pay off your mortgage.
  • Find out if you are entitled to any help, discounts or benefits if your household income changes.

 

Option 1.

Sell the family home, pay off the mortgage and agree on a split of the remaining money.

This is the hardest option, but ultimately most couples will end up doing this at some point.

Financially it makes the most sense because its clean cut, but you have just lost your relationship, dealing with the loss of your home can be too much to bear.

If you are considering this option, it would be a good idea to speak to one of our friendly advisers to find out how much you could borrow on a new mortgage for another property call 0330 400 4242.

Advantages:

  • Clean break, fresh start.
  • Money can be the biggest cause of animosity, resolving this early starts the healing process early.

Disadvantages:

  • It may not be a favourable housing market to sell in.
  • You may not be able to afford to buy another property in the short term.

 

Option 2.

One party buys the other out, also known as a transfer of equity.

A transfer of equity also known as a transfer of title is used to remove or add a person as an owner of the property. In divorce or separation, the person to be removed from the mortgage will also need to be removed as owner of the property. This would need to be agreed with the mortgage lender if there is one and the remaining owner would need to demonstrate they can afford the mortgage on their own and pass the lenders credit score. This would apply to any increased loan if the leaving party is being bought out.

Advantages:

  • Fast

Disadvantages:

  • It can be difficult to meet the lenders borrowing requirements as a single person.
  • There can be legal fees and you could be charged Stamp Duty.

 

Option 3.

The mortgage continues and one of the parties moves out.

The remaining party may be able to afford the mortgage in real terms, but not the lenders affordability criteria. Both parties remain on the mortgage and agree to sort things out later. This situation may also be the case if one parties abandons the family home and disappears.

Advantages:

  • Sometimes you have no choice.

Disadvantages:

  • Things need to be sorted out at some point.
  • Late payments will be registered against both parties
  • Neither party can real move on.

 

Top Tips

  • Good communication is going to be important during this time, with your mortgage lender and the other party involved.
  • Missed mortgage payments can stay on your credit file for up to 6 years. It is important for everyone the mortgage is paid on time.
  • Try to picture how everything will be at the end and what you want to happen. Is it achievable? Is it fair?
  • There will be compromise. Be prepared for it. Not everyone is going to get exactly what they want.
  • Try mediation, it is cheaper than court and the mediator could help reach a compromise early. It will also give you an idea of what the courts will look at and how they view things like assets and income.
  • If there are children involved it is important to consider their housing needs with both parents.

 

This can be a very difficult time and it is important to have someone on your side. To speak to one of our friendly advisers call 0330 400 4242.

 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP THE REPAYMENTS ON YOUR MORTGAGE.

2019-02-07T14:50:57+00:00January 28th, 2019|