What Happens to a Mortgage on Divorce?

If you are going through a divorce, you may be wondering who will take responsibility for the mortgage following separation. We take a look at how this can be dealt with and what might happen to your property.

With high mortgage rates making older fixed deals valuable, you may want to have the right to keep your existing mortgage if you are going through the breakdown of a relationship. Alternatively, you may need to negotiate how mortgage payments will be dealt with if one person is staying in the property but they cannot afford to meet the payments on their own.

Who should pay the mortgage in the short-term?

If one party moves out of the property, they may feel that they should no longer have to contribute towards the mortgage payments. However, where a mortgage is in joint names, both parties are liable to meet the payments. If you were to simply stop paying and the mortgage was to fall into arrears, this would affect your credit score and you might have difficulty in securing a mortgage in the future.

In the worst-case scenario, the property could be repossessed, in which case the lender would sell the property and deduct both the amount outstanding on the mortgage and its substantial fees from the proceeds.

The best solution is to reach an agreement with your former spouse over how the payments will be dealt with each month. If the person staying in the property cannot afford to meet them on their own, you can negotiate contributions from the other party. This could ultimately be in return for a larger share in other assets, although unless you are on an interest-only mortgage, part of the payment will go towards paying off the capital and therefore give you both a larger stake in the property.  This is something you should seek advice on from a family lawyer.

How is a mortgage dealt with in the long-term?

There are several options available when dealing with financial matters on divorce. You will both be required to make full financial disclosure to each other in the course of reaching a settlement, so you will be able to assess whether either of you is able to take on the payments.

If one party cannot afford the payments on their own

If neither of you can pay the mortgage on your own and you do not have any children, then the property can be sold, the mortgage paid off and the net sale proceeds split between you.

If you have children, then the person with whom they will be living may need the home to provide adequate accommodation for them. One option is to keep both the property and the mortgage in joint names. This is not ideal, as it means that the other party will usually be unable to take out a mortgage themselves.  However, often first consideration is given to the children’s needs.

If one party is able to take on the mortgage

If one party is able to afford the mortgage on their own, then the property and mortgage can be transferred to their sole name.

If there are insufficient other assets to pay a fair sum for the property, then the court can make an order for deferred sale. This means that the party living in the property could stay there, for example, until the children finish their education, or if the person living in the property were to remarry/cohabit, after which time the property would be sold and the sale proceeds shared.

Financial order

Whatever you decide to do, it is crucial to have a financial order put in place by the court. Without this, your former spouse or civil partner could potentially make a financial claim against you long into the future.  The only bar to this is if they remarry.

It is also an opportunity to finalise your financial affairs and ensure that there is a clean break between you meaning neither of you can make further claims in the future or upon your death.

Contact us

If you would like to speak to one of our expert family or property lawyers, ring us free on 0800 8840 640 or email us at FamilyNewEnquiries@everys.co.uk or ResidentialPropertyNewEnquiries@everys.co.uk.