According to the most recent statistics, the number of divorces in the UK has been decreasing since 2003. In 2015, there were 101,055 divorces, a 9.1% decrease compared with 2014, and a decline of 34% from a recent peak in 2003.
Aside from the emotional trauma, divorce can wreak havoc on your finances. With a property mortgage being one of the most common shared investments, handling yours correctly through the divorce process will enable both parties to separate with as strong a financial footing as possible.
The first steps
If you have changed your circumstances in the shape of a divorce, your first port of call should be to contact your financial advisor. This is particularly pertinent if you think you might struggle to meet your monthly repayment commitments.
Most lenders are likely to be sympathetic to this, and will give you some additional breathing space in the form of a so-called “payment holiday”.
Your options
Once you have this secured, you have three options:
1. Both parties agree to sell the property and move out: this requires that the mortgage is paid off from the proceeds of the sale, and what is left is shared between the parties.
2. The mortgage is transferred into one name: this means that one of the parties will buy the other out of the mortgage, including any equity. In this circumstance, the remaining party will need to be able to prove to their lender that they are capable of paying the full monthly amount. This includes their ex-spouse’s share of the equity. If they are unable to do this then the lender will not be able to offer this option.
3. Continue to pay the existing mortgage: this is particularly viable if the mortgage is nearly paid off.
Regardless of which route you take, it is wise not to finalise the divorce until your mortgage is taken care of. If things get messy, you may need to prepare for court action to make your ex remove your name from the mortgage through selling or refinancing.
Following your divorce
While lenders no longer offer 100% loan-to-value Divorce Mortgage Programmes without a guarantor, there are specialist divorce mortgages that include similar benefits, as well as relaxed initial rates to provide breathing space.
To prevent emotions taking control of you and your ex-spouse’s behaviour, we recommend seeking independent financial advice. Our experts have access to over 5,000 mortgage products giving you a wealth of options and, ultimately, relative freedom in a challenging time in you and your ex-partner’s life.
To see how our experts can help, call IMC today on 020 3553 9340 or email us at info@imcfs.co.uk.