Navigating a Joint Mortgage After Separation: Your Options and Next Steps
Separation or divorce is never easy, especially when you share a joint mortgage. At Kerr & Watson, we understand that handling joint financial responsibilities during such times can be daunting. This guide will help you to understand the various options available. For individual advice, get in touch.
What Happens to a Joint Mortgage After Separation?
When you and your partner have a joint mortgage, both of you are equally responsible for the mortgage repayments. This financial obligation doesn’t change with your relationship status, meaning that even if one of you moves out, both parties remain liable for the full mortgage payment. If one of you doesn’t pay, this will affect both of your credit ratings.
Financial Responsibility
Joint Liability
Both names on the mortgage mean both parties are “jointly and severally” liable. This means if one person stops paying, the other must cover the entire payment to avoid default, you are not responsible for just your half of the payment.
Credit Impact
Any missed payments can negatively affect both your and your partner’s credit scores, making it more challenging to secure future loans or mortgages. You can get a free report from CheckMyFile who offer a 30-day free trial after which a subscription fee applies, which can be cancelled any time.
Find out Your Options
Options for Handling a Joint Mortgage After Separation
There are several pathways you can consider when deciding what to do with a joint mortgage after a separation. Each option has its pros and cons, depending on your financial situation and personal preferences.
Continue Paying the Mortgage Together
If both parties can manage it, continuing to pay the mortgage together until a more permanent solution is found is one option. This is particularly practical if you are nearing the end of your mortgage term or if there are children involved, providing stability during a transitional period.
Sell the Property
One straightforward solution is to sell the property, pay off the mortgage, and split any remaining proceeds. However, this can be complicated if the property is in negative equity or if both parties do not agree to the sale.
Buying Out Your Partner
One partner can choose to buy out the other’s share of the property. This involves:
- Valuation of Property: Determine the current value of the property and subtract any outstanding mortgage balance to work out the equity.
- Equity Calculation: The remaining equity is split according to your agreement, and the buying party pays the selling party their share.
Transfer of Equity
In some cases, one partner may keep the property, and the mortgage can be transferred to their sole name, a process known as a transfer of equity. This typically requires:
- Lender Approval: The remaining partner must meet the lender’s affordability criteria to take the mortgage on their own. The lender will look at their affordability and lending criteria. If they cannot agree to accommodate this, a new lender may be required. You can utilise our affordability calculator to get a guide on your affordability.
- Legal Process: Involves changing the names on the property’s title deeds and removing the other party from the mortgage. A solicitor will be needed for this transaction as both parties will require legal advice.
Guarantor Mortgages
If the partner wishing to keep the property doesn’t meet the affordability criteria, a guarantor mortgage might be an option. This involves a third party, usually a family member, who agrees to cover the mortgage payments if the borrower cannot. Both the borrower and the guarantor’s credit will be affected if the mortgage is not paid.
Legal Considerations
The legal aspects of a joint mortgage during separation can be complex. Here are some important considerations:
Matrimonial Home Rights
If you were married, both partners have equal rights to stay in the home, regardless of whose name is on the mortgage or title deeds. You may also apply for a Notice of Home Rights to prevent the sale of the property without your consent. You should speak to a solicitor for more information about this.
Court Orders
In cases where amicable agreements cannot be reached, court intervention may be necessary. The court can issue orders like a Mesher Order or Martin Order, which allow one partner to remain in the property under specific conditions, such as until children reach adulthood.
Legal Advice
Consulting with a solicitor specialising in family law is advisable to understand your rights and obligations fully. They can guide you through negotiations, court proceedings, or the drafting of legal agreements.
Common Challenges and Solutions
Partner Stops Paying Their Share
If one partner stops contributing to the mortgage, it’s crucial to:
- Notify the Lender: They may offer solutions like adjusting payment plans or switching to an interest-only mortgage temporarily. This may affect your credit so may not be suitable for everyone so make sure you take professional advice before making any decisions.
- Seek Legal Advice: A solicitor can advise on the best steps to protect your interests.
- Consider Mediation: This can help both parties reach an agreement without the need for costly legal battles.
Affordability Issues
If affordability becomes a concern, consider options like:
- Remortgaging: You might secure a lower interest rate, making payments more manageable. Speak to a mortgage adviser who can look at the options of both remaining with your lender and looking for a new one.
- Taking in a Tenant: If permissible with your lender, renting out a room or the property could help cover mortgage and household costs.
Conclusion
Handling a joint mortgage during separation requires careful consideration and often, professional guidance. Whether you’re considering selling the property, buying out your partner, or exploring other options, it’s essential to understand your rights and responsibilities. For expert advice and support, contact Kerr & Watson today.
