With the current cost-of-living increases and high interest rates, affordable mortgages are a key concern for many homeowners.
This is also true for couples who are going through or are about to go through a divorce and are wondering how this will affect the arrangements they have in place.
The fact is, many divorcing couples will have a mortgage, and the family home will most likely be their biggest asset. The mortgage could be in both parties’ names, or it could be in just one name. Either way, the house will be considered a matrimonial asset, and this means it will be dealt with as part of the divorce financial settlement.
What are my options when dealing with a mortgage during a divorce?
There are a couple of ways in which a matrimonial home can be dealt with when a marriage or civil partnership ends. Hegarty Solicitors has outlined these options and their implications.
1. Selling the former matrimonial home
If you decide that you’d like to sell your house as part of a divorce, then usually both parties will agree to appoint an estate agent to get a valuation and the best sale price. Once a sale is agreed, your solicitor will obtain a redemption statement from the mortgage company to find out how much is left to pay on the mortgage.
When the sale is complete, the solicitor will redeem the mortgage in full, ending all liability and obligation that both parties have to the mortgage company. The net sale proceeds would then be divided in the proportion you have agreed as part of any divorce settlement.
2. Keeping the former matrimonial home
If one party owns the matrimonial home in their sole name and both parties decide that they will keep it, then usually the first step is to agree on the value or agree to get it valued by a professional.
This will help you decide what, if any, lump sum should be paid to the party leaving the property. There is no need for a transfer of property or redemption of the mortgage in this scenario because it would already be in the sole name of the party keeping the property.
If the property is owned by one party but is to be transferred to the other, then you will go through this same process to ascertain the value and any necessary lump sum, if any is payable, but there will then need to be a transfer of the property and redemption of the existing mortgage. Both spouses will require separate conveyancing solicitors for the transaction. A new mortgage can be taken out over the property during this transaction if required and will be in the name of the person who will own the property.
If the property and mortgage are in joint names and it is being transferred to one of you, you would either ask the lender to release the other party from the existing mortgage, or you would take out a new mortgage in your sole name and redeem the existing mortgage.
What if the lender will not agree to a property transfer?
It’s important to know that the legal title of a property can only be transferred with the approval of the lender. If the lender will not agree, for example, because the party wanting to remain in the property does not have the necessary borrowing capacity, but you do not want to sell the house, then you can have an arrangement whereby the property remains in joint names to be sold at some future date or when certain events occur – for example when a child of the family completes secondary education.
This is known as a ‘Mesher Order’ and this may be appropriate where the parent with care of the children wishes to remain in the matrimonial home but does not work, or only works part-time. This can be Ordered by agreement as a Financial Consent Order or by the Court at the conclusion of Financial Remedy proceedings.