What happens to joint property in a divorce?
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The matrimonial home is generally the most important asset which needs to be dealt with upon divorce.
Any jointly owned property can be quite complicated, especially what happens to a joint mortgage when you divorce.
So what are the options and your joint mortgage separation rights?
Joint mortgage separation rights
Questions that we get asked most often relate to joint mortgage separation rights such as ‘who pays the mortgage when you separate?’ or how to go about ‘removing name from mortgage after separation?’.
Deciding who pays for a joint mortgage during a separation or after a divorce will often be down to individual negotiation and agreement between the two parties. Any such agreement can form part of a consent order (see below). If an agreement cannot be reached, it may be necessary to go to court.
What happens to a joint mortgage when you divorce?
Where there is an outstanding mortgage on a property, it needs to be paid, because to be blunt the lender expects it to be paid regardless of the marital situation and whether one party has left the property.
Couples with a joint mortgage who are planning to get divorced should inform their mortgage provider immediately to discuss the best options for dealing with repayments going forward. They may be able to offer ways to reduce the monthly repayment, such as extending the mortgage term, taking a repayment holiday or even making a reduction in interest rates.
But the important thing is that regular repayments for joint mortgages must continue being made, even if one or both of you have moved out.
This advice applies regardless of whether you are joint tenants or tenants in common.
Any failure to make full payments on time will be considered a breach of contract by the mortgage provider which could potentially lead to a repossession of the property. Furthermore, it can also damage the credit rating of both parties, making new mortgage applications or even renting a property more difficult in the future.
A joint mortgage means joint responsibility
It may be difficult to keep up the mortgage repayments as the person who leaves usually has to fund another home and may struggle to pay their share of the mortgage.
It could also be equally difficult for the person left in the home if they are caring for children and don’t have sufficient income to make repayments because they do not have a job, only work part-time work or are living on benefits.
If you think you and your former spouse will be unable to afford the mortgage repayments contact the mortgage lender first.
Additionally, your local Citizens Advice will be able to offer advice on benefits, child support, and other means of repayment.
Ultimately, you may have to consider selling your home if the mortgage repayments cannot be met.
Dealing with a joint property after a divorce
There are various options for dealing with a joint property with a mortgage when owners decide to divorce. These can range from one spouse selling their equity to their ex-spouse to both selling the property outright.
Another option may be for one spouse to remain in the family home while the other moves out.
Selling a joint property after divorce
Putting the property on the market may be the best way of achieving a clean break. Proceeds can be divided to help both parties find their own homes and make a new start. Normally the money from the sale will be split 50:50 but this can be negotiated – or decided by a court.
NB: If there has been a housing crash and the property has gone into negative equity, selling up may not be an option, as it will potentially lead to hefty personal debts. In this case, it may sometimes be best to carry on paying the mortgage until the market improves.
Buying out jointly owned property
Another common method for dealing with a joint mortgage upon divorce is for one ex-spouse (who wishes to carry on living in the property) to effectively take on the mortgage of the other party by buying them out.
This method also provides for a clean break, but it is dependant on one of the joint owners being in a financial position to take on the entire mortgage.
In marriages where there are young children, sometimes the husband will move out upon separation but carry on paying his share of a joint mortgage, leaving his wife and kids in the former matrimonial home (or vice-versa).
This arrangement can carry on upon divorce and may form part of the overall maintenance agreement. Although this does not lead to a clean break, it can work in the case of amicable breakups where one party is in a stronger financial position.
NB: In this scenario, the party who has moved out may want to remove their name from the mortgage even though they are continuing to make payments (as this can make it easier for them to get a new mortgage), but this is subject to the financial situation of both parties.
Carry on paying and living at the property
In the case of very amicable separations, both ex-spouses may decide to carry on paying off their joint mortgage whilst living together in the same home as friends.
This is an increasingly common scenario in today’s inflated housing market, where it is often impossible to get a mortgage without a partner or live independently. There is obviously no clean break but this is a straightforward option.
What is a consent order?
A consent order essentially provides legal standing to an agreement between a divorcing couple, providing them with a method of enforcing the agreement later down the line.
This can be particularly useful in the scenario mentioned above relating to maintenance payments, where there isn’t a clean break. A consent order can also enforce a divorce settlement to prevent one party from making financial claims on their former spouse at some point in the future.
Clean break consent orders are vital in divorce proceedings, especially when there is property is involved. However, many divorcing couples are put off due to the prices high street solicitors charge.