Having those initial thoughts and discussions when first deciding to separate, and how to separate, can be very daunting and worrisome, with many people wondering what happens with the mortgage on the family home and who will be responsible for paying it.
Who Should Pay the Mortgage Following a Separation in the Short-Term?
When parties separate, it is usual that one party will either want to move out of the family home or will need to move out of the family home, whilst the divorce and resolving financial matters is in progress.
If one party moves out, they may feel that they should no longer contribute towards the mortgage payments because they are no longer living in the property, and most likely having to pay rent or a mortgage on their new accommodation. However, when a mortgage is in joint names, even if one party moves out, both parties remain liable to pay the mortgage and will be pursued jointly by the lender should payments not be made. If mortgage payments are not made and you fall into arrears, you will run the risk of the house being repossessed by the lender.
It is recommended, if possible, to try and reach an agreement with your former partner on how the payments will be made and who will make those payments. If the person who is planning on staying in the property cannot afford the payments on their own, you could try to negotiate that the other party contribute towards the payments or continue making the payments. In circumstances, where the party who has moved out refuses to contribute towards the mortgage payments and there is a significant disparity in the income between the parties it is possible, once divorce proceedings have been issued, to make a maintenance pending suit application for interim spousal maintenance. This is an application made to the Court which will mean that you will be on the Court’s timetable, which can be rather slow, and you will need to ensure that the mortgage payments are covered in the meantime to avoid falling into arrears and the lender being in a position to take action, such as possession proceedings.
How is the Mortgage dealt with in the Long-Term?
There are several ways in which financial matters (including the property) can be dealt with in divorce. Both parties will be required to make full financial disclosure of all of their assets to give a full picture of each other’s financial circumstances which will then be assessed when considering the best possible settlement.
Potential ways of dealing with the property and the mortgage include:
- If parties cannot afford the mortgage or if parties do not wish to keep the family home it might be decided to sell the home, pay off the mortgage and divide the proceeds of sale between you in accordance with the settlement you have reached, or the order made.
- If the party who is staying in the property can afford the mortgage on their own and provided the lender consents, the mortgage can be transferred into the sole name of the party who is staying in the property. The other party might receive their share of the property either by way of a lump sum payment or by offsetting with another asset - for example if there is a healthy pension.
- Rather than transferring the mortgage, the party staying in the family home may decide to re-mortgage in their sole name, but this would require that party being able to afford those payments. The non staying party might then receive their share of the property either by way of lump sum or by offsetting.
- Sale of the property can also be deferred, for example until the children are of a certain age upon which the property would then be sold, and the proceeds divided in accordance with the agreement reached or order made. In circumstances like this, it is usual for the party staying in the property to meet the mortgage payments.
Do Not Forget that a Court Order is Needed to Bring Financial Matters to an End
Within the divorce, it is important to make sure that your financial claims against one and other are brought to an end, which can only be done by way of a court order, either by consent or by way of the court imposing an order on the parties. It is worth saying that is likely to be preferable, less stressful and more cost effective to obtain an order by consent, rather than the court imposing an order. If you do not obtain an order from the court resolving the financial matters, financial claims will remain open until you get one.