Divorce and Mortgages – What to Know

According to the Office for National Statistics, around 42% of marriages end in divorce. So, it is not unusual to have to work out how a divorce will affect your mortgage. 

But if you’re going through a divorce and are concerned about how it might impact your home and your mortgage, don’t worry.

There are lenders out there who are keen to help you.

Selling my house during a divorce

In theory, the most straightforward option is to sell the property, pay off the outstanding mortgage, split any remaining proceeds, and then proceed on your own separate paths.

But that overlooks the emotional connection you have with a property and the logistical issues it may raise if children are involved.

So what happens if one partner wants to take over the mortgage and keep the house after a divorce? 

Several options are open to you, ranging from a simple remortgage to arranging finance with a lender offering a specialist divorce mortgage programme. However, the first step will involve chatting with your existing lender.

Speak to your lender

Once it is clear that you and your partner are splitting up, it’s a good idea to speak to your lender.

It may be an uncomfortable conversation, but they will generally be sympathetic to your plight and offer you a payment holiday to help ease the financial burden.

However, this will only be a temporary measure, and you will need to work out a more long-term solution.

You will still be responsible for the mortgage during the divorce process. If you stop paying the mortgage during the divorce proceedings, you risk repossession. 

Consent Orders and Financial Orders

If the split is amicable, and both partners agree to how your finances will be divided – including the property – then you will need to get a Consent Order to make it legally binding.

This needs to be drafted by a solicitor and signed by both ex-partners. It costs £50.

If you can’t reach an agreement, you can ask the courts to make a Financial Order for you.

This process runs separately from the divorce itself and can take up to a year. It costs £255 and may require several court hearings.

Can my ex sell our house?

If your partner is the sole owner of your home, you may be worried that you are powerless to stop them from selling it.

However, you can protect your right to live there by registering a Notice of Home Rights with the Land Registry.

You’ll need to know if the property is registered in your partner’s name and its title number if it is.

There are different forms depending on whether the property is registered or unregistered, but the good news is that it is free.

This will only be a short-term option though – a Notice of Home Rights only guarantees your right to live in the property until the divorce has been finalised and a court settlement is agreed.

If there is an ongoing dispute about who owns what, the court may make a ‘continuation order’ allowing you to stay on the property for longer.

Divorce mortgage buyout

If you have a joint mortgage, you’re both responsible for making repayments, irrespective of whether you still live there.

So, your credit scores will be affected if you fall behind on your mortgage repayments.

If one partner wants to remain in the property, they will need to take over the mortgage after divorce.

They must demonstrate to the lender that they are capable of making the mortgage payments independently, without the help of their ex-partner.

The lender will assess them as they would a new applicant to establish whether the mortgage is affordable based on their income alone.

They are not obligated to remove the other partner from the mortgage deed unless the borrower can pass this test.

Even if you can afford the current mortgage on your own, you may need to ask for a larger loan to proceed with buying out your partner from the joint mortgage.

You will need to prove that you can afford to refinance the house after divorce at this level. 

Transfer of Equity

A Transfer of Equity is needed when you want to change the legal ownership of a property with a mortgage.

If you plan to remove a name from a joint mortgage, you must apply for one.

Only once it is in place will the lender remove your ex-partner’s name from the mortgage.

Lenders may insist on the use of a solicitor here, though some online conveyancers offer DIY Transfer of Equity packs. 

Getting a mortgage after divorce – what is a guarantor mortgage?

In recent years, lenders have been forced to be much more thorough in assessing what borrowers can afford when taking out a mortgage.

As a result, the process can be rather tricky if you have just gone through a divorce.

One option is a guarantor mortgage.

With a guarantor mortgage, the borrower must find someone—perhaps a parent or sibling—to ‘guarantee’ that they will be able to meet their monthly mortgage repayments.

The guarantor will often have to pledge their own property as collateral so that if the borrower falls into default, the lender can pursue the guarantor for the unpaid debt.

A guarantor mortgage may be an option if you want to keep the family home but cannot prove that you can cover the existing mortgage repayments alone. They offer the lender some peace of mind.

Guarantor mortgages may also be an option if you choose to sell and want to buy a new property elsewhere.

However, it is important to bear in mind that many lenders do not offer guarantor mortgages, preferring instead to offer a joint mortgage in which the parent or sibling is a joint borrower and owner with the divorced applicant.

As a result, you are likely to have very few options if you want to pursue a guarantor mortgage.

Specialist divorcee mortgages

Some years ago, lenders like the Yorkshire Building Society devised specialist mortgages designed for divorcees.

Yorkshire’s Fresh Start range allowed borrowers to borrow at 100% loan-to-value and charged minimal rates of interest in the first couple of months to give them some breathing space.

Sadly, there aren’t any such mortgages available today, though some lenders have put together initiatives aimed at helping divorcee borrowers, implementing Divorce Mortgage Programmes that guarantee a manual underwriting process and emphasis on the applicant’s evidence rather than Office for National Statistics data.

Speak to a good mortgage broker to see what options are available to you.

Child maintenance and your mortgage

Different lenders take very different approaches to child maintenance and mortgages.

Some will consider 100% of the child support payments when assessing whether a borrower can afford the mortgage they have applied for.

Others will only consider a percentage of that income, while some lenders will not include it when assessing affordability.

Equally, some will only consider it if it has been received for at least 12 months or it has been court-ordered.

Consequently, it is a really good idea to get professional advice from a mortgage broker who knows exactly what lenders will be most appropriate for your circumstances.

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