A divorce or a separation can be very stressful, for practical as well as emotional reasons. There will be a lot for you both to consider and in the context of this article, this will include the joint mortgage that you hold together.
As both of your names are on the mortgage agreement, you both have the right to live in the same property. You are both liable for the mortgage repayments too, even if one of you moves out of the house.
So what can be done about the joint mortgage? There are a number of options ahead of you and we will consider these in this guide. But if you have any questions after reading our article, please get in touch with our friendly and experienced team.
What happens to a joint mortgage after a separation?
Both you and your ex-partner have joint mortgage separation rights, such as staying in the marital home if you both choose to.
Staying put isn’t ideal, of course, even though you both have the right to do so, as it’s usually the case that one partner will vacate the property after separation. Life could become very stressful and complicated otherwise.
But what happens to your joint mortgage? Well, there are various options to consider but in the meantime, it’s important to remember that you are both ‘severally liable’ for keeping up with the mortgage repayments, even if one of you is now out of the house.
If you miss mortgage payments and go into arrears, this will have a negative impact on your credit file and the same applies to your ex-partner. If you can’t afford to pay the mortgage payments, you should contact your mortgage lender as they may be able to offer you a temporary solution.
It has been our experience as an established mortgage broker that separating a mortgage from a joint mortgage needs to be done very carefully. Its been our observation that time needs to be taken in the planning and it is not something that should be rushed into. – Stephen Roberts
Can a joint mortgage be transferred to one person?
Yes, as we will discuss below, you have the option to transfer the mortgage to one person. This is done through a legal process known as a ‘transfer of equity.’ You would then remove your ex-partner’s name from the title deeds (or vice versa) and they or you would stop paying a financial contribution to the loan.
You could consider a mortgage buyout. This is when you buy your partner out of the property by taking over the other’s share of the mortgage. A mortgage buyout can be straightforward however it depends on how much equity there is in the property and if you have savings or can get their percentage to buy your partner out.
With mortgage lender consent, you can do this even when you’re still married, so you don’t necessarily have to separate to transfer the joint mortgage to one person.
If you consider this option, you don’t have to stick with your existing lender. Speak to a mortgage broker such as ourselves to find out which mortgage lenders may be able to give you a better deal on a remortgage.
Should I go to court?
You only need to go to court if you are in a disagreement with your ex-partner about what to do with the family home and you risk losing your share of the property.
But considering the stress and legal fees involved with a court case, it’s better to either resolve any issues together or through mediation.
You should also find out more about each other’s matrimonial rights, as knowledge of these should negate the need to go to court if you have an understanding of where each joint owner stands, legally speaking.
Ultimately, it’s up to you. However, you should seek legal advice. Speak to a divorce solicitor to get independent legal advice if you do have any disputes with your former partner.
Learn more about How to Remove A Name from a Joint Mortgage
What joint mortgage options are available after a break-up?
There are plenty of options to consider and these may end any disagreements you have had with your ex-partner.
1. Pay off the mortgage
If you’re reaching the end of the mortgage, you could both continue to share mortgage repayments until the entire mortgage has been paid off.
When you are both completely free of the loan, you will stop being financially linked. You will then have the option of selling the property and sharing the proceeds. You could then clear your other debts with the money received or put it towards a deposit for a new home.
2. Sell the property and split the proceeds
Regardless of where you are in the mortgage term, you have the option to sell the property and once the current mortgage lender is repaid split the proceeds between you. Should you be in negative equity, you would then have to share the outstanding debt with your ex-partner.
3. Buy out your partner and remain in the property
If one person wants to remain in the property and they have the ability to make the monthly mortgage payments alone, they could buy their former partner out of the mortgage.
The amount paid would depend on how much of the loan still needs to be paid and what the other partner is willing to accept. This could be half the mortgage amount or less or more than that, depending on the agreement between the two parties.
Regardless of who decides to live in the property, it is still important to get the mortgage lender’s consent. Before agreeing to transfer the loan from joint tenants into one person’s name, they would need to carry out an affordability check to make sure they could afford to pay the loan and any debt secured against the property without the income of another person.
4. Find a guarantor
If you want to take over the mortgage and remove the other person from the mortgage documents, but don’t have the ability to pass the lender’s affordability checks, perhaps because of a low credit rating, a guarantor mortgage could be an option if you have a family member willing to help you out.
As a guarantor, the person would sign a legal declaration saying they agree to pay the mortgage if you are unable to do so.
The person you choose for guarantor would still need to pass the lender’s credit checks and other eligibility criteria, so it’s advisable to choose somebody with a good credit history and financial background if you take this step.
Another option could be to add a parent to the mortgage as a second applicant.
5. Retain a stake in the property
One part of the value of the property can be transferred from one partner to the other as part of the financial settlement. So, even if one of the joint owners gave up their share of the ownership rights, they could still retain a stake in the property. As such, when it is sold, they would then receive a financial share of the property value.
6. Take out a Mesher or Martin Order
If you live in England or Wales, you can resolve any disagreements with a court order. There are two types: a Mesher or Martin Order.
This is a family court order that allows the sale of the home to be postponed for a set period of time. If a Mesher Order is given, one person can remain in the home until a ‘trigger event’ happens. This could be when the youngest child finishes their full-time education or when the person decides to move into a home with a new partner.
This type of order is similar to a Mesher Order but children aren’t usually involved. It is often made when one partner wants to postpone the sale of the property so they can continue living there indefinitely. They would then be able to live in the home until they die, move out, or remarry.
How a mortgage broker can help with joint mortgage separation
If it is of beneficial interest for you and your partner to separate and you want to know what to do with your joint mortgage, get in touch with our team of mortgage experts.
We will consider the mortgage terms of your agreement and will give you the mortgage advice you need on the best way forwards.
If you need a new mortgage after moving out of your home, an appointed representative will help you find a great loan deal, be that with your current lender or a new mortgage lender if a better deal can be found elsewhere.
We can also help you to remortgage onto a better mortgage deal with the same or different mortgage lender if you’re the person who remains in the home after your separation. This way, you should find it easier to pay the loan as we will find you a deal that offers lower monthly repayments to reduce your financial burden.