How divorce or separation affects your mortgage – and what to do next

The end of a marriage or long term partnership is far from straightforward. Beyond the emotional strain of separating from someone who was once a central part of daily life, the practical realities can be equally, if not more, challenging.

When shared assets are involved, the process becomes even more difficult. Property, investments and other financial commitments are ties that need untangling. But, where do you even begin? Read on to discover your mortgage options following divorce or separation.

Sell up

The most straightforward option when deciding what to do with your shared property and associated mortgage is to sell up. Following the sale of the property, the proceeds can then be used to pay off the mortgage with any remaining equity divided.

It is important to note that not all assets are divided equally. Even assets in just one of your names may be considered a marital asset and therefore split accordingly. The same applies to any property proceeds, which will be divided in accordance with your divorce or separation agreement.

Non-working partners also have just as many rights as working partners when it comes to the division of assets, with non-financial contributions to family life given as much weight as financial contributions in the eyes of UK law.

Buy out

If one of you would like to keep or remain in the property, then you may be interested in the buyout option.

In this scenario, the person keeping the property pays the other their share of the equity. As a result, you will need to calculate how much equity you have and how much is due to your ex-partner. This includes calculating the value of your home as well as any mortgage debts. Here The Telegraph offers a great example:

“If your home is worth £250,000 and your asset is being split 50/50 but you still have a mortgage of £100,000 on the property, the equity both you and your partner have in the property will be only £75,000 each (£250,000 minus £100,000 then divided by two.) In this case, you may need less to buy out your partner, but could find yourself contributing more to the mortgage going forwards.”

After the buyout, the property will need to be refinanced under the sole name of the person keeping the home. During refinancing, the remaining spouse will undergo affordability checks to ensure they can pay the mortgage on their own.

No refinancing

If the partner remaining in the property cannot afford to take on the mortgage alone, neither partners want to sell the property, or a deferred sale (if children are involved) is agreed, you may be able to transfer ownership of the property without refinancing.

In some cases, the lender may allow the mortgage to stay in both names while the property title is transferred to just one partner. Others agree to keep the property and mortgage in both names for a set period with a plan to sell or refinance later. Whatever option you go for, both parties will remain legally responsible for the mortgage unless refinancing occurs.

Rent it

You may prefer to explore your rental options during divorce or separation. This is especially beneficial if neither person can afford the mortgage alone or selling the property isn’t currently possible.

Becoming an accidental landlord and renting out the property can help to cover the cost of mortgage repayments until a longer term solution can be agreed by both parties.

Seek help

If an agreement can’t be reached, you can seek an order to allow the court to decide what happens to the property. As a joint mortgage holder, doing nothing is simply not an option. It is the responsibility of both parties to repay the mortgage, and failure to do so will impact both you and your ex-partner negatively.

Before seeking a court order, we recommend consulting your lender. They may be able to offer options such as payment holidays, mortgage restructuring or other arrangements to ease the financial pressure during the transition.