What happens the family home is a big question for a divorcing couple during the separation process. Agreeing that one spouse will continue to live in the home, possibly with the couple’s children, is common; but any solution is going to demand careful financial and legal planning. Below we outline some of the the main considerations.
A solicitor who specialises in family law and divorce will be well versed in the financial aspects, such as the costs associated with separation, spousal or child support, and the tax implications.
A financial advisor will likely be needed too, depending on the assets involved and the degree to which one partner, or the children, are financially dependent. So, too, where one party wants to secure an individual mortgage, there is a high degree of personal financial planning, and work with the lender, to be done. A mortgage broker is best to advise, and can detail various options.
Those hoping to make mortgage repayments on their own, while the other spouse is removed from the mortgage, will need a comprehensive understanding of their financial situation, including the current value of the home and the outstanding mortgage payments due.
Where spouses have a joint mortgage, both parties are equally responsible for making the repayments. This responsibility continues, even after separation, if both parties are still named on the mortgage. So, it is crucial to maintain regular payments, to avoid credit damage.
The following steps will help assess the possibility of buying out an ex-partner, or maybe securing a new mortgage on your own.
This is crucial for any separation settlement, and involves assessing your income, assets, debts, expenses, and credit report. Knowing your financial health is crucial, not just when applying for a mortgage, but to move forward independently.
Removing one borrower from the mortgage and the Title of a property requires a full credit assessment of the remaining borrower. This means:
Speak with your mortgage lender or a broker to assess your eligibility for a mortgage. They can help you understand the loan options available and the financial requirements for approval. A broker will outline specific measures to secure a new or the existing mortgage, in your own name.
Calculate how much mortgage financing you will need to purchase, or retain, the marital home, including what, if any, buyout is due to the borrower being removed. Consider the associated expenses too. You may have an option, if you are within certain criteria, to release equity in the property to ‘buy out’ an ex-partner and cover the associated expenses.
Gather relevant financial documents, including mortgage statements, property appraisals, and loan documents. This is essential during any divorce negotiations or proceedings. For a new mortgage application, you need pay slips, a salary cert, tax returns, bank statements, and proof of other income sources, to streamline the application process.
Create a budget that includes mortgage payments, property taxes, insurance, and maintenance costs. Ensure you can comfortably afford these expenses, while meeting your other financial obligations, particularly over the long-term. Explore different mortgage options, including fixed-rate mortgages. A mortgage professional will look at the pros and cons of each, to determine the best fit for your circumstances.
Keep your solicitor and mortgage lender informed about the progress of divorce proceedings to ensure a smooth transition. A deed of waiver needs to be incorporated into your divorce agreement, and the waiver document is signed by both parties when a Decree of Divorce is granted. It confirms that you both waive your entitlement to each other’s property, into the future, and the ownership thereof, and that you consent to all future property transactions that either of you might engage in.
Divorce is difficult, and mortgages are tricky to navigate at the best of times. Now, more than ever, ensuring a roof over our heads is everyone’s priority, and crucial where a family is involved.
Some advance planning and professional guidance from a broker will go a long way to, not only identify the issues with home ownership and transfer but to help address them too.
Article by Margaret Barrett
Managing Director at Mortgage Navigators,