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Talking to Your Mortgage Lender About Your Divorce

By: Lorna Elliott LLB (hons), Barrister - Updated: 14 Mar 2018 |
 
Mortgage Divorce Loan Finance Home House

Whatever stage of your divorce you’re in, you are likely to have given a lot of thought to what happens to your family home. Of course, in the first instance your mortgage repayments need to be maintained – as failure to do this will harm your credit rating and make it less likely for you to be able to secure finance in the future.

Once you have decided that you and your spouse are definitely going your separate ways, you will have to decide who lives where. Normally if you are married, you will both jointly own your property. On separation or divorce, each person is entitled to a share of the equity in the property. There are several options, and it doesn’t necessarily follow that because you are divorcing you will need to sell your home.

Contacting Your Lender

Nearly four in ten marriages end in divorce, and mortgage companies are used to dealing with customers who are separating. If you contact them in good time, and before anything goes wrong, they are generally sympathetic and will do their best to help you. It is therefore wise to let them know that you are divorcing as early as possible so that they are aware and can offer you the best assistance.

Your Finances

It is also worth ensuring that you have as much financial information to hand as possible. If you have not decided on how you are going to split your assets, or on maintenance payments at this stage, this may not be possible. If, however, you are able to provide your mortgage lender with an accurate financial picture this will ensure that they can provide you with the best advice.

One Person Stays in the House

It is possible to buy your partner’s share of the family home. If you want to do this, a surveyor will come round to value your property. The person buying the home then gives the other person half of the value of the deposit, plus half of the increase in the value of the house. Then, the person who is staying in the property meets the mortgage payments themselves. You don’t necessarily have to have the money put away in savings – you can increase the value of your mortgage to do this if there is sufficient equity in your home to do so.

Paying the Mortgage

The mortgage market is becoming more aware and pro-active in offering solutions for the difficulties faced by divorcing spouses. For example, there are specialist mortgages that treat maintenance payments in the same way as they would normal income. These maintenance payments do not necessarily have to be secured by court order, but could also be by private arrangement.

If you receive working tax credits and child tax credits, or if you have a secondary income of some sort, the mortgage company may be able to take this into account when calculating whether or not you will be able to afford the mortgage payments.

Finding the Right Mortgage

Be direct, clear and concise in your dealings with your mortgage company. If your existing lender does not offer specialist advice for divorcing couples, find one that does. If you are at all unsure of your legal rights, seek advice from a solicitor. In some circumstances your solicitor may be able to help you to find a mortgage company that is able to accommodate your circumstances.

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@Ginpin - ideally she would first of all have to come to an agreement with her ex over the finances surrounding the house, as all this question may be academic if it has to go through court. Even if she is left with £150K mortgage, it is unlikely any mortgage advisor will let her remortage to that extent on her current £12K earnings, with or without your help. Her bills, and your own circumstances would have to be taken account and for this you would need the advice of an independent mortgage advisor. I hope this helps.
DivorceResource - 8-May-15 @ 12:39 PM
My daughter may need to buy her husband out of the family home as he has said he is leaving. Their joint account has paid the mortgage but only his earnings have ever been put into this account. My daughter provided the £1oo,ooo deposit and £8,ooo fees, from the sale of her own first home of which she had paid off the mortgage.They have only had their joint home for 17 months. It has probably not gone up in value and probably very little mortgage has been paid off as yet. Assuming this, and that they have an agreement whereby she keeps the deposit, what will she need to pay him to get him out? Will it be the mortgage that he has paid for the 17 months?Also, she earns just enough to pay all the bills but, most likely the mortgage company won't see it like that.I am 58 and earn £2o,ooo in a part time teaching job, is it likely that I will be allowed on the mortgage with her in order for her to keep the house? The mortgage is £15o,ooo and she only earns £12,ooo rising to £19,ooo in a year's time when she qualifies.
Ginpin - 7-May-15 @ 5:37 PM
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