Divorce is a significant decision that can have lasting financial repercussions. As a result, you may ask yourself “can I afford to divorce?”
The link between finances and divorce
Financial concerns have always been an important factor in divorce and civil partnership dissolution, but the current backdrop of economic uncertainty and rising costs has intensified this pressure, meaning every decision counts.
Whether you’re gathering information in preparation for telling your partner you want to separate, or you’ve just learned your partner wants to end your marriage and you are trying to work out what this will mean for you financially, knowing your options is vital.
How are mortgages handled in divorce? How much does it costs to divorce? And why is it so important to resolve your finances? Here we explain key considerations to help you make informed decisions about your divorce finances.
Can I afford to divorce my partner?
It’s a valid question considering the increased cost of living and the multiple factors affecting divorce finances.
Plus, not only is there a cost associated with the process of divorce itself, but some fear that legal fees will eat away at whatever assets remain after the split, leaving them less well off in the future.
When you add it all together it’s understandable that some will be forced to rethink their plans.
The challenge of creating two homes
One of the most urgent financial challenges of divorce is the need to create two new separate households. Unfortunately, there is no guarantee that the matrimonial pot will stretch to this.
There’s also a question of running costs. Where it’s likely you once combined two incomes to cover the day-to-day cost of running a home, after divorce this will change. The worry for some is they won’t be able to cover costs on their own, even with spousal maintenance, and it’s not difficult to see why.
The average UK house price was £285,000 in March 2023. Food and energy prices remain stubbornly high, and inflation reached a 45-year high earlier in the year. Last month the Bank of England responded by increasing interest rates for the 13th consecutive time, taking it to 5%, leading to a mortgage crisis.
Sadly, there’s not a lot of good news to balance the uncertainty, but there are options that can help you to manage your divorce finances in a way that best suits you and your family.
What are my mortgage options in divorce?
If you’re a homeowner with a mortgage, an immediate priority is to decide how it will be managed during divorce or civil partnership dissolution.
Given houses are usually a couple’s most valuable asset, it’s likely to be central to your divorce. What you and your partner choose to do with your family home will have a significant impact on your future finances.
Mortgages are typically dealt with in three ways as part of a larger financial settlement:
Option 1. Sell the house, pay off the mortgage, and agree how to divide any equity
By selling the family home, paying off the joint mortgage, and sharing the remaining equity it means, if funds allow, you each have money to potentially use as a deposit for a new home.
While the starting point for dividing assets is typically 50:50 in divorce financial settlements, the process takes into account both parties’ borrowing capacity as well as any savings and how much each party needs to be able to find suitable alternative accommodation, to determine exactly how the equity should be split.
Option 2. Keep the house and mortgage in joint names, agreeing it will be sold later
This option keeps couples financially tied together, potentially for years to come, so it is usually considered when one parent is unable to obtain a mortgage or rehouse on their own or to allow the children to remain in the family home until they reach a specific age at which point the house can be sold.
After weighing up all the options, some divorcing parents choose to continue paying off the mortgage together, while they split their time there 50/50. This is known as birdnesting.
Their children continue to live in the family home 100 per cent of the time to minimise disruption and provide some consistency, which can be helpful when supporting children through divorce.
Option 3. One party buys out their ex-partner’s interest in the house, releasing their ex from the mortgage, and transferring ownership into their sole name
This may be a viable option for you if you or your ex are financially capable of taking over the mortgage by yourself and funding the buy out of the other partner’s interest.
Another factor to consider is whether the party continuing to own and live in the home can afford the running costs independently.
Sometimes, couples negotiate offsetting other assets, such as pensions, savings, or investments, in order to keep the home, although legal and financial advice is critical before you reach any decisions with your ex to avoid costly mistakes.
Of course, variable factors such as the value of your property, the housing market, and available mortgage rates, will all impact affordability. It’s important to get professional advice from a family lawyer or an independent financial adviser to help ensure the best possible outcome.
As interest rates look set to continue to rise, there is now an increased urgency to resolve any financial issues as quickly as possible before mortgages go up again.
The cost of divorce
There are costs associated with the legal process of divorce and civil partnership dissolution, and how much you will pay depends on which option you choose.
Option 1. DIY online divorce
Also known as kitchen table divorce, DIY divorce is where couples apply for their divorce themselves using the UK Government’s online portal, without legal support from a divorce lawyer. There is a £593 court fee, but no legal fees.
This approach is recommended for couples separating amicably, with no assets to split.
Crucially, it’s important to note that finances are not resolved during the online divorce process. So while it’s cheaper at the outset, there are financial risks of DIY divorce that may be costly in the future.
Read our guide to divorcing online.
Option 2. Fixed fee divorce
If you want the reassurance of some legal support, with the certainty of a fixed cost, Stowe’s fixed fee divorce package is an excellent option. Fixed fee divorce is a cost-effective solution if you and your ex have no financial and property disputes, or child arrangements to make, and works well when couples are on good terms.
The benefit is knowing the cost from the outset:
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- If you are the applicant fixed fees are £1493 (including the court fee)
- If you are the respondent fixed fees are £450
Fixed fee divorce isn’t appropriate for all couples. For example, where there are financial disputes, child matters to resolve, or abusive individuals. In these cases, our divorce lawyers will offer an hourly rate package that is tailored to your exact needs.
Option 3. Lawyer-led divorce
Every divorce is different, and while some are straight-forward to resolve others will need greater legal support to ensure a fair outcome, for example divorces involving:
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- Child arrangements
- Complex financial matters
- High-net-worth
- High conflict
- A history of abuse.
Family law matters can be complex, successfully navigating them can require expert handling from a divorce lawyer.
Furthermore, not resolving complex issues with the support of a divorce and family law specialist may leave you vulnerable to devastating, and long-lasting consequences.
The cost of using a family lawyer to divorce can vary depending on a range of factors, such as the complexity of the case and the level of cooperation between you and your ex-partner.
However, a lawyer’s expertise, strategic problem solving, and support can be invaluable when navigating intricate or high-conflict divorce.
Court fees
The £593 court fee applies to all divorces. Typically, the person initiating the divorce pays for the court fees. You may be eligible for help with paying court fees depending on how much money you have in savings, which benefits you get, and what your income is. Find out more here.
The importance of sorting out finances
Apart from the divorce itself, it is crucial to address the financial aspects of your separation before you are granted your final order. This includes making legally binding financial arrangements through a court-approved consent order.
If you have assets such as pensions, property, savings, and investments, then making a legally binding divorce financial agreement it vital. Securing a fair financial settlement now will give you some valuable financial security for your future.
During the process you can settle any financial disputes, determine how to divide assets, and ensure your ex cannot make future financial claims against you.
Did you know you can use a divorce lawyer to handle your divorce financial agreement, even if you opted for an online or fixed fee divorce?
Specialists in divorce financial resolutions, a divorce lawyer can support you through this fundamental stage of proceedings. By working with a family lawyer during your financial agreement, you can help to reduce overall costs while ensuring you benefit from their expertise where it’s needed most.
How to keep costs low in divorce
Certain costs such as court fees are fixed and unavoidable. However, in lawyer-led divorce cases there are practical steps that can help reduce costs. Read our guide to managing divorce costs to find out more.
Legal Aid
In England and Wales, legal aid is generally not available for the legal costs of divorce or dissolution, unless certain conditions are met. Exceptions include cases involving domestic abuse (including financial abuse), or you’re at risk of homelessness.
To find out if you meet the criteria for legal aid, Citizens Advice can give you more information.
Please note that Stowe cannot offer Legal Aid.
The decision to divorce is an already complex one that has been made more challenging since the cost-of-living crisis began. Consulting with family solicitors and financial advisors can help you assess affordability based on your own unique circumstances. By exploring your legal options with a professional, you can avoid costly mistakes and achieve a fair outcome from which to create your new life.
Useful links and resources
Stowe talks podcast – budgeting solo during a cost-of-living crisis
The cost of financial uncertainty on relationships
Guide – What is a financial settlement?
Get in touch
For more information about divorce finances and to explore options further please do get in touch with our Client Care Team using the details below or make an online enquiry.
