When it comes to divorce, and dividing up assets, the largest financial concern most couples have to deal with is property. Unfortunately, this means it’s often the largest point of contention during separation negotiations – particularly if there are disagreements about living arrangements and how you’re going to keep up payments when one of you has moved out.
If you have a joint mortgage, you are ‘jointly and severally liable’ for it, which means you will need to come to an agreement about how the mortgage will be paid for after divorce, regardless of who is living in the property.
Essentially, lenders don’t really care whether you’re both paying your ‘fair share’ of the mortgage, so long as it’s paid. Lenders will hold you both liable regardless and can pursue you for arrears, so it’s in your interest to come to a decision about your finances as soon as possible.
Obviously, this can quickly become complicated as your living arrangements change, and disagreements often arise over how to finance two separate properties, who gets to stay in the family home, and how you’re going to divide up your assets and finances.
In all cases, your first step should be to discuss your options with your solicitor, but in general there are several different ways to deal with a joint mortgage, depending on your circumstances:
- Clean break: Sell the property, pay off the mortgage and divide up any proceeds. This is the simplest solution all round but may not be suitable if one party wishes to remain in the family home.
- Buy out one partner: One party remains in the property and buys out the other, removing their name from the mortgage. This is a common solution for couples with children where the main caregiver wants to stay put, though it can be difficult if they are unable to afford a solo mortgage.
- Ongoing contributions: One party remains in the property but the partner who moves out continues to contribute to the mortgage on a temporary or longterm basis. For example: A couple with children agree that the partner who moves out will provide support with the mortgage until their children reach the age of eighteen. Or a couple agree to continue to split the mortgage until they are able to sell the property later down the line.
If a couple is unable to come to a mutual agreement on how to handle their joint mortgage, the case may be taken to court where a judge will make the decision for them based on their circumstances, finances and individual needs. If at all possible, however, it’s always better to try to reach a decision between yourselves using the advice and support of your solicitors, either via negotiation, arbitration or mediation, as keeping things out of court will save you an enormous amount of time, money, and stress.
It’s also worth noting that married couples have legal rights over their home, even if one of them is not named on the deeds, and ‘contributions’ don’t necessarily have to be monetary payment of the mortgage. The Family Court will take into account the practical contributions of spouses who have stayed home to care for children, and make a decision based on what is deemed best for all those involved. (Unfortunately, this is not always the case for cohabiting couples, which is why it’s important to have a Declaration of Trust and a cohabitation agreement to protect your legal rights.)
If you’re entering into separation and have a joint mortgage, contact your lender and inform them of the situation as soon as possible. You may be able to take a brief payment holiday while you sort out the logistics, and speak to an advisor about your options for re-mortgaging. Bear in mind, however, that a joint mortgage means your credit records are intertwined with your spouse, so any related unpaid debts could impact your credit rating in the future – all the more reason to ensure you come to a practical decision about your mortgage as soon as you can.
The best thing to do is speak to an experienced solicitor about how to proceed, try to communicate amicably with your ex, and start making some practical plans. Look at your financial situation, make a pre- and post-divorce budget, and find out how much you’re able to afford when it comes to re-mortgaging or taking out a solo mortgage. And remember the stamp duty limit has been raised to £500,000 until March 2021, so if you’re considering selling up and buying a new place, now’s the time to do it!
For more info and personalised advice on your situation, get in touch with our team at Frances Lindsay & Co. We offer a FREE 45-minute initial consultation for all family law clients to help you figure out your options and take the next step.