Its bad enough when a relationship breaks down, but if you are unable to separate your finances it can be especially difficult. If you are splitting up but own a property jointly then you need to know what’s possible when you go your separate ways.
The first question many people ask is what should happen to your house and mortgage? Should you sell it and take your share, and who is entitled to it? It’s not always simple to divide your assets, and that includes property, but the good news is there are solutions for everyone.
With that in mind, let’s try to answer some of the most common questions:
Q: Should you sell your house?
Selling the property will not always yield an exact 50/50 split, and will incur costs. Your share of the sale proceeds will be after deduction of; legal fees, estate agents, removal costs and possibly early repayment charges for your mortgage.
Then consider the cost of buying too which will also eat into your cash, that’s legal fees again, probably Stamp duty, valuation or survey fees, mortgage arrangement fees, removal fees and those annoying little fees for reconnecting services such as phone, broadband etc. Inevitably you may not have all the furniture you will need, and the new home may require decorating or repairs. Phew!
So, its clear that you will need to carefully do your sums first to see what you will actually end up with and equally important, what can you borrow on a new mortgage. Maybe it’s possible to avoid some of the expense and stress and stay where you are by buying out your ex-spouse. Maybe your ex can buy you out? At this point you need to speak to a financial advisor specialising in mortgages.
Q. Can I buy out my spouse?
This is going to depend on various factors, for example, your credit score, number of dependents, your earnings and outgoings such as loans, credit cards etc. You will also need your ex-spouse to agree to the sale and manage all of the legal requirements that come with that decision.
Q. How much do I need to get a new mortgage?
The sum required is no longer a set multiple of your salary, for example 4 times your gross earnings. Each mortgage lender has its own affordability calculator, an independent mortgage broker can guide you through the options suitable to you, and avoids you asking dozens of lenders for their view of your circumstances. It also avoids you lowering your credit score by making too many enquiries – yes, that’s a thing!
Q. If I don’t earn enough can my ex-spouse remain as a guarantor?
Not as such; however your ex could simply move out but remain on the mortgage. This will potentially stop them from taking out another mortgage themselves, so it may not be a good option for them. There is also the question around them benefitting from future growth in the property value, this is a separate point in interest. An alternative is provided by a few lenders who can offer something called Joint Borrower and/or Sole Proprietor mortgages. This means that both incomes can be used when working out how much you can borrow, but only one person owns the house.
Q. If I move out and my spouse is paying the mortgage am I still responsible for the mortgage?
Yes, you are both still responsible for the mortgage payments. While you are still named on the mortgage, you are required to keep up repayments or face the risks of lowering credit score, penalties or possible loss of your property.
Q. If I move out and my spouse says they will pay the mortgage but doesn’t, will it affect me?
Yes. Missed mortgage payments make it almost impossible for you to take out another mortgage for quite some time. The mortgage repayments must be continued in line with your agreement, until another agreement is in place.
Q. If I am stuck on the mortgage because my ex-spouse can’t buy me out, will it affect me when I apply for a new mortgage myself?
Yes. The cost of those mortgage payments are deducted when calculating what you can borrow. A mortgage advisor will be able to guide you on how much you can borrow, and how existing mortgage repayments will affect your options.
So, what does all of this mean for you? In short, we can’t say without more details about your specific circumstances. Speaking to an independent mortgage advisor (like us!) will provide you with answers, and future mortgage solutions.
Why not give one of our specialist mortgage advisors a call? We’re here to help and don’t charge a fee for initial consultations. Click the button below to book an appointment today.