What Are Your Options When Getting a Mortgage After Divorce?
Whilst divorce is not the cheeriest of subjects, it is a sad fact that 42% of marriages end in divorce. If you are one of these couples you may believe that going your separate ways is a simple case of dividing your assets 50/50 but contrary to popular belief this is not necessarily the case
When getting a divorce there are many factors that will cross your mind one of the most prominent factors that both parties will be considering is the family home.
When it comes to divorcing a partner with whom you own a property, there are no set rules regarding decisions about the ownership after you have separated, it depends on the individual case. Importantly, courts will give priority to ensure that any children as a result of the relationship have a secure home. If neither party is able to buy their partner out of their share of the property, there are several orders that courts may make, depending on what best suits the divorcing couple and any children.
We work with clients on a regular basis showing them what they can afford and how they can either stay in their current home or move into a new property.
Can a Mortgage Be Transferred in a Divorce?
A mortgage can be transferred in divorce proceedings, but this is all dependent on your personal circumstances. As every financial situation is slightly different and divorcing can make this even more complex.
Transferring a mortgage could be done when one spouse owns the mortgage, but the other spouse has been awarded the home’s equity in divorce proceedings, in this case, the mortgage must be transferred over to the appropriate spouse.
This can be an in-depth process as mortgage lenders will want to underwrite the mortgage to ensure that affordability is there and that their risk of lending the money has not been increased.
Speaking to a fully qualified mortgage advisor is crucial to getting advice when looking into this or being advised by your divorce solicitor or the courts.
During the process of a divorce, you will be looking to split shared assets between both partners. The main asset that is commonly shared between both partners is a property in the form of a family home and buy-to-let properties.
What Are My Options When Going Through a Divorce?
There are two common options when going through a divorce and what to do with the family home.
1– Buying Your Ex-Partner Out After Divorce
This is the preferred option of the two, especially when children are involved as neither partner wants to add additional uncertainty to their children.
How Does Buying My Ex-Partner Out Of The Family Home After Divorce Work?
This involves transferring the deeds from joint names to sole names and with one partner remaining in the home. In most cases, at the stage of divorce, the family home still has a mortgage on it and this needs to be considered carefully.
The first steps are to arrange an independent valuation of the property and request a copy of your latest mortgage statement to get an accurate settlement figure on the loan.
Once you understand what the property is worth you can take the value minus the outstanding mortgage and the amount remaining in the equity you hold in your home.
Every divorce proceeding is slightly different, and it is not always a 50/50 split of the equity and assets in some circumstances we have seen as much as 80/20.
Depending on what your solicitor and the courts have agreed you can then easily work out the amount of equity you need to give to your partner to buy them out of the property and change the deeds into sole names.
How Do I Finance Buying My Ex-Partner Out Of The Family Home?
This is done by applying for a new mortgage in your sole name. This will be treated as a brand new mortgage application so it is always a good idea to contact a qualified advisor who can help you understand your options.
At Prestige Mortgage Solutions we take the time to understand your individual needs and look at the most suitable options for your personal circumstances.
2– Selling The Family Home After Divorce & Buying a New Property
There are many reasons why you may have to sell your family home it could be a want or a need. After selling the family home you are normally presented with two options buying a new home or renting a property. If you are looking to buy a new home understanding what you can afford to borrow is the first step.
This allows you to start getting an understanding of what type of property you can purchase. This is where a mortgage advisor can come in there are many calculators available online to work out mortgage payments but post-divorce there are now even more things to consider when working out your potential mortgage borrowing.
You could be reviewing maintenance or paying maintenance, eligible for new state benefits or reducing your hours due to increased commitments. All these things affect your affordability and the amount you can borrow on a mortgage in different ways.
What Is a Mortgage Capacity Report? & Why Do I Need One?
When you are going through a divorce and there is a mortgage involved, the courts will request a mortgage capacity report. This report is a detailed investigation into the level of mortgage borrowing you are likely to be able to obtain post-divorce.
The mortgage capacity report does not recommend a specific lender but it will provide illustrations and indicative interest rates so that the courts can understand your affordability when deciding on splits of assets etc and what you need.
Contact Prestige Mortgage Solutions for an initial consultation. We can arrange an appointment with a compassionate qualified mortgage advisor to carry out your mortgage appointments over the phone or video conferencing.
Mortgage Capacity Reports are not part of the PRIMIS Mortgage Network offering and are offered in our own right. PRIMIS Mortgage Network accept no responsibility for this aspect of our business. Mortgage Capacity Reports are not regulated by the Financial Conduct Authority.