Divorce and your mortgage – I want to buy my partners share of our home
There’s no doubting that Divorce is a stressful time for all parties involved. However, in many instances one of the parties wishes to remain in the family home and doing so isn’t as easy as many would think. Below are some of the important points to remember.
What will the banks require?
Firstly, you need to agree with your ex-partner on a figure that will see you retain the family home.
This agreement may involve you taking over the current mortgage plus increasing the loan to buy-out your ex-partner. This will be dependent upon the terms of your agreement.
At the time of an application being submitted, lenders generally require a copy of a draft transfer of property and a draft separation of assets. The solicitor assisting you with your separation proceedings will be able to produce these for you.
Can you service the loan?
As with any loan application you will need to be able to show that you can afford the new loan in your own right. Your chosen lender will assess your application like any other, taking in to consideration your income and expenses, dependent children and previous credit history.
What if there is not enough equity in the property?
In some cases, there is not enough equity in the home to be able to buy out your ex-partner. If unsure of the value of your property, you should engage an independent property valuation firm to value the property. Once a value is established you will better understand of your options. Where sufficient equity does not exist, you may need to consider selling the home.
What costs are involved?
Whilst you should always check with your Solicitor, in the majority of marriage or de-facto breakdowns, no Stamp Duty is required to be paid when transferring your ex-partner’s share of the property in to your name.
Depending upon the complexity of the financial situation, you should set aside appropriate funds for your legal fees. It is recommended that you have regular conversation with your Solicitor regarding their fees, so as to avoid any unwanted surprises.
What if I am advised to stop paying on my current mortgage?
If you are advised this, DO NOT STOP PAYING! The same can be said for council rates and other bills in joint names.
Until you have the agreement of the lender or service provider to cease payment, you should assume you are still responsible to meet the repayments. Lenders, and all service providers, can list bad conduct, late payments and default payment on your credit history report. Any default listed on your credit file will make securing future extremely difficult and expensive.
It is important to remain vigilant throughout the period of your separation and ensure the mortgage and any bills associated with the property are paid on time.
Surely my current Bank will approve me automatically?
This is a common mistake. Your situation will change, your living expenses will change and your household income will change. All of these matters will need to be taken into consideration by your chosen lender.
It’s important to note that once you have received approval for your finance, lenders will not settle or finalise the loan until they have received either Court Stamped Orders or a Binding Financial Agreement which outlines the agreed and final allocation of assets.
There’s so much to consider whilst going through a separation and it can be easy to feel overwhelmed. It’s important to seek out appropriate advice and support, whether a Solicitor, Accountant or Mortgage Broker.
The team at WFS is well versed in assisting clients in this situation. To further understand what your options may be please get in touch and we will be happy to assist.