It can be a really stressful and worrying time when you are separating/divorcing from your partner. Everyone’s circumstances are so different, so it’s really important you look for advice in the right places.
There is plenty of free information online from service providers like the Citizens Advice Bureau and moneyhelper.org.uk that can break down the process for you and point you in the right direction.
You are likely to need a solicitor for legal advice and a mortgage advisor if you have a mortgage on the current property.
Let’s talk about what happens when you decide to separate but both jointly own a property with a mortgage…
Firstly, it’s crucial to understand that if you have a mortgage in joint names, you are both still jointly and fully responsible for keeping up the mortgage payments, even if one of you has moved out. “Jointly and fully” means that both and either of you are responsible for maintaining your side of the mortgage contract, regardless of who is living in the property or making the payments. If you are struggling to meet your mortgage payments, then you should contact your current lender. They may be able to offer some temporary help whilst you come to a new arrangement with your ex-partner.
Any missed payments at this stage can hurt both of your credit ratings, and that could be important if you want to buy a new home using a mortgage in the future. When you have shared borrowing with another person (ie a joint mortgage) your credit files are linked by association. Therefore, at this stage, if you miss any payments, not only can it negatively affect your credit file, it can also affect your ex-partner’s credit file.
Thinking a little further ahead, there are a few potential options regarding what can happen to the mortgaged property.
One option is to sell the home, and both move out.
If you have any equity in the home once the current mortgage has been redeemed, this could be split between you and used to help you each buy a new property if you can afford one. You would need to agree between you (or with the help of legal advice or court proceedings) how much each person will get after the sale. Bear in mind there may be other costs associated with selling your property, such as estate agent and solicitor fees, and any other costs associated with redeeming the mortgage, such as early repayment charges, to take into consideration.
Then a new mortgage would be subject to affordability and eligibility checks as usual.
One of you could buy out the other partner.
This is when one of you would take over the mortgage in your own name and pay the other for their share of the equity. This is called a Transfer of Equity. The mortgage lender must be happy that the person staying on the mortgage is able to maintain the mortgage payments on their own.
You may need to restructure the loan at this point to help it fit with your affordability, but you should be aware that making changes to the loan may incur early repayment charges. Check the terms and conditions on your most recent mortgage statement or offer.
Postpone the sale.
Another common scenario is that a legal agreement is drawn up which allows one party to remain living in the current property until a specific event, such as the youngest child turning 18, which would then trigger the sale of the property. This is called a Mesher Order.
The most important thing is to seek advice from qualified mortgage brokers and legal advisers, as everyone’s situation is different and it’s impossible to say what the right option is for you without understanding your whole situation.
Before you reach out to a mortgage broker, check your current mortgage contract – the current balance, amount of equity and any fees associated with redeeming the mortgage will be the figures we would focus on first.
Then we would help you to assess your affordability by looking at your income, outgoings and credit commitments. Once we have done this, we will be able to let you know if it could be possible for you to buy out your ex-partner or buy a new property using a new mortgage.
If you decide to move on and buy a new home, the following information might be useful to you…
Can someone else’s income count towards my affordability?
If you are looking to buy a new property by yourself but your income is too low to borrow what you need, then there is the option of a Joint Borrower Sole Proprietor mortgage. This is where you can have up to 4 people apply for the mortgage, and their joint income would be used to calculate how much can be borrowed. All applicants are jointly and legally responsible for the mortgage; however, only one person is on the property’s title deeds and can live in the property (along with their dependants). This is quite a common way for parents or other family members to help out in this situation.
Can someone gift me the money for a deposit?
Yes, many mortgage lenders are happy to accept gifted deposits from family or friends. They will need to be able to see where the money came from and a letter from the donor stating they are happy to gift you the money and that they do not want it back or claim any stake in the property.
Can I get a mortgage if I’m on benefits?
Some benefits/universal credit are accepted by lenders towards affordability. It is much more likely to be accepted if they are combined with your employed/self employed income, rather than being your only stream of income. Long-term or permanent benefits such as PIP, DLA, Carer’s Allowance and Child Benefit are looked at more favourably by lenders. It would all come down to your affordability. Speak to a mortgage broker who can help talk through your specific circumstances.
Deed of Trust/Declaration of Trust
If you want to buy a property with someone but one person is putting up a larger share of the deposit, you can have a Declaration of Trust drawn up by a solicitor to set out what happens if you ever come to sell that property. It is a permanent record of who provided what money towards the purchase and who gets what if the property is sold. It can be used when the deposit amount from each party is unequal, the deposit comes from a family member or friend (that want their share back when the property is sold) or if you are an unmarried couple or buying a property with a friend.
