If your relationship has come to an end, one of the biggest financial decisions you'll face is what to do with your mortgage. Break-ups are stressful at the best of times, but if you're living together and have a mortgage, things can get messy. Read on to find out how to sort out your mortgage when you split up.
One of the most important things to bear in mind is that couples who jointly own a home are both responsible for keeping up the mortgage repayments. This applies whether you’re joint tenants or tenants in common.
Even if you continue to pay your 'share' of the mortgage, your lender can still pursue you for the whole amount. If you fail to make repayments it could harm your credit score, making it harder for you to be approved for loans in the future.
When you're splitting up, one of the first discussions you should have is how you’re going to keep paying the mortgage.
If you’re struggling, your lender might agree to grant you a mortgage payment holiday - a temporary break from making repayments. Interest continues to accrue during a mortgage holiday, so it could cost you more in the long run.
Eventually, you and your partner may want to disentangle yourselves from the mortgage. There are several ways to do this. The option that’s right for you will depend on many factors, including your financial circumstances and whether you have children.
Some options to consider include:
Retain a stake in the property - If you're married, your property will be part of the financial settlement of your divorce. Your solicitor will discuss this with you, but it will often be based on the financial needs of each person and whether you have children.
Regardless of which option you choose, your legal share of the property will determine what you're entitled to.
A married couple’s home is legally classed as a joint asset, even if only one person’s name is on the mortgage and deed. The quickest and cheapest option is to decide between yourselves who gets what. If this isn't possible, it would need to be settled by the courts who will make a judgement on what is 'fair.'
The law assumes that unmarried joint tenants own their home equally. This means you'll each have a 50% share of the property. If you sell your home, you’ll get half of the proceeds. If you buy your partner out, you’ll need to subtract the outstanding mortgage balance from the value of the property and then give them half that figure.
When one partner has paid the whole deposit and made most of the mortgage repayments, this may seem unfair. Unfortunately, the law doesn’t look at fairness when it comes to unmarried couples.
Tenants in common can own a home in unequal shares. However, it's vital to draw up a legally binding document at the outset declaring the percentage of the property you each own. This will help to avoid any uncertainty or ambiguity if you split up.
Unmarried couples who are buying a home should always consider entering into a cohabitation agreement. This highlights who owns what and in what proportion. It can also set out how much each person will contribute to the mortgage.
It’s really important to seek professional advice on your mortgage when you split up with your partner.
A mortgage broker can offer advice on disentangling yourselves from a mortgage. They can help you to decide which option is right for you, based on your current situation and finances. They can also explain how much money you’d be able to borrow on your own.
At a stressful and difficult time, speaking to a mortgage broker can bring much-needed peace of mind.
If you're splitting up from your partner and would like help assessing your mortgage options, please get in touch. Request a callback or call us on 03300 583 859.
Please note: Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.