How does a Divorce affect your Mortgage?
In a divorce situation, both assets and liabilities have to be split fairly between the two parties. For most people, the family home will be an asset which has a liability attached to it. In other words, the family home will be a source of equity, but it will also have a mortgage attached to it. It will also, by definition, be the place where the family lives. This combination of facts can lead to all sorts of complications when a couple divorce, especially when there are children involved, but these complications have to be resolved.
You must keep paying the mortgage for as long as you own the house
Assuming you have a joint mortgage, then you are probably “jointly and severally liable” for the mortgage payments, which basically means that you need to keep making them even if you have stopped living in the house. If you can’t afford to move out and pay the mortgage on your current property, then legally the most sensible approach is to stay put (assuming it’s safe for you to do so). Your partner cannot force you to leave and if it takes two of you to pay the mortgage (or you are the sole breadwinner) it is not in their interests to do so.
For the sake of completeness, while lenders tend to be fairly sympathetic to divorce situations, they do expect the mortgage-holder(s) to do everything possible to make good on their payments and, if there are difficulties, to resolve them as quickly as possible, by whatever means possible, including selling the house. Failing to do this can not only damage your credit record (which has all sorts of implications these days) but lead to your home being repossessed.
Selling up and moving on can be the best option even when there are children involved
For the most part, there is a strong preference for keeping children in their established home and there are a lot of good reasons for this. At the same time, however, children are going to need attention from both their parents, especially during the instability of a divorce situation (no matter how amicable it is or how responsibly parents are handling it). Parents are unlikely to be able to devote their full, calm attention to their children if they’re worried about how to pay a mortgage, so it may make sense to sell up and move on until the situation stabilizes. It may even make sense for both parties to rent for a while until the dust settles and they see where they are.
Alternatively, if there is a lot of equity in the home and the remaining partner can afford to service a mortgage, you could flip the situation on its head and release equity from the family home to give to the person leaving it. Although equity release is often associated with older people, quite a lot of it does happen in divorce situations and it can work very well.
After divorce, lenders usually count child support as an expense but not as income
When buying property after a divorce, each half of the former couple will be assessed on their ability to pay a mortgage and this is where life can get interesting. If you are paying child support, then lenders will treat this as a non-negotiable expense. If, however, you are receiving child support, then lenders will not necessarily treat it as income. This may seem nonsensical but the fact is that if you have the ability to pay child support then you must pay it, but if you are due to receive child support then you are dependent on your ex-partner’s ability to pay it. If their circumstances change, then so will your payments. In other words, you can only get what they have.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.