From your mortgage provider’s point of view, your divorce is irrelevant; you each signed the joint mortgage contract, and so as things stand, you both remain as liable for paying it as if you were still together.
Should you so choose, you can continue paying off the mortgage together, whether you both live in the house, one party lives in the house, or even if neither you nor your ex-partner does.
In an ideal world, you might keep your mortgage or re-mortgage to get a better deal whilst getting the house and the mortgage in your sole name.
This is referred to as a Transfer of Equity – one person agrees to come off the property title, typically as part of a larger agreement, or in return for a sum of money. From then on, you would be the sole owner of your property.
You’ll need to negotiate with the other party to the mortgage, possibly via your solicitor: Will they agree to come off the mortgage? How much money do they want for their share of the property? Will this affect any other agreements (i.e. maintenance payments)?
Book a family law consultation with a lawyer before agreeing. Before these discussions, you should determine how much you can borrow, and if you have enough to take over the mortgage on one income, this will affect what you plan to do.
Once you have reached an agreement, you must change your mortgage or arrange a new one. This will take time, and there may be additional fees involved; taking someone’s name off a property, for example, requires a divorce solicitor – and the solicitor representing you in your separation may not be able to act for you.
Beyond that, when applying for a mortgage, you may encounter some difficulties; the first of these is affordability. A joint mortgage underwritten on two incomes may not pass the lender’s affordability test with just one income – even if you’re not asking for any more money and even if you have been paying it on your own for some time.
If this is possible, it may be the best solution. However, even if the lender is not lending you any extra money, this reduces the security of their loan from their point of view.
They’ll go from having two people with separate incomes to only having one. If you can meet all their lending criteria, they’ll almost certainly agree, but if you can’t (and it may take a long time to get a definite answer), then they won’t agree to it.
Another issue some people have is credit scoring. Before separating, you may have had money worries, or built up big credit card balances, or perhaps you’ve kept your finances in good order whilst your partner has not.
By taking a joint credit agreement (such as a mortgage), you’ve linked your credit files held by the Credit Reference Agencies, so even if you’ve kept your accounts in perfect order, if your credit file is linked to another file with a low score, this will drag your score down.
Credit scoring is a complex topic, but the key point is that it can take a long time to repair the damage done to your credit score – years perhaps. So, if you’re remortgaging whilst separating, you will have to do so with your current credit file.
That depends very much on your circumstances, but yes: your interest rate may change.
A mortgage broker would first look at a high street lender to get you the best rates, if possible. However, if your financial circumstances are not ideal, they may need to look at other options.
If, for example, your credit history is in poor shape, they may need to put you with a higher-rate lender for several years before arranging a re-mortgage to another lender after your credit file has recovered.
Many lenders only look back a set time (24 months, 48 months etc.) for missed payments, defaults or other issues. So, after paying a higher rate for a few years, there may be better options available to you.
Ultimately, it’s a matter of time and money; A broker might need only 2-3 hours of your time during the whole process, and you could have your new mortgage in place in a matter of weeks. To research lenders and personally handle the application on your own would take much longer but would, of course, be free.
At Stowe Family Law, our top divorce lawyers have helped thousands of people in similar situations, so they can confidently answer any question you may have regarding divorce. Our divorce and child custody lawyers can also help with issues beyond your financial settlement.
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