What happens to my joint mortgage if I separate from my partner?
Around a quarter of new mortgage approvals are now based on a couple’s joint earnings so financial issues involving a relationship break-up are extremely common.
Relationship break-ups are sadly a fact of life. They can be messy and if the couple breaking up are living together, and co-signatories to a mortgage, the messiness can increase exponentially.
This guide is designed to provide advice, to help couples with joint mortgages navigate some of the key issues involved when separating.
Can a joint mortgage be paid by one person?
If you have taken out a joint mortgage with someone, whether it is a spouse, a civil partner, someone with whom you are co-habiting, or simply a friend, you are both ‘jointly and severally liable’ for the mortgage. That means if you separate, you and your ex partner have to come to an agreement about how to pay the mortgage, as walking away from a joint mortgage is not an option. A number of practical consequences flow from this time-honoured legal term. In particular:
1. If you stop making the mortgage payments as a result of a relationship break-up, your lender will hold both of you liable and can pursue both of you for any arrears. The fact that one of you may have continued to pay ‘their’ share of the mortgage does not affect this principle.
2. Your credit records are intertwined and if you have unpaid debts such as a mortgage with an ex-partner, this could impact on your long-term credit ratings.
Paying the mortgage after separation
Remember that, however acrimonious the break-up may have been, the disentangling of a joint mortgage depends on decisions taken jointly, so it is vital to keep lines of communication open with your estranged partner. A range of options are worth exploring depending on your financial circumstances:
1. You can simply sell the property, pay off the mortgage and split the proceeds.
2. One of you can remain in the property with their name alone on the mortgage and ‘buy out’ the other partner. This is often done when there are children involved so the children can remain in the family home until they are grown up. Buying a partner out of your house has the advantage that the partner who remains in the property is not reliant on an ex-partner for mortgage payments. But it can be an expensive option and lenders will want to satisfy themselves that the partner remaining in the property can meet any outstanding mortgage commitments on their own.
Keeping the lender informed
If a relationship has broken down and one of the co-signatories to a joint mortgage is left living in the property on their own, it is advisable to notify the lender of the situation as soon as reasonably possible. This is particularly important in situations where one partner is planning to buy the other partner out by re-mortgaging the property. “Whilst lenders are sympathetic to those finding themselves in this position, it is worth getting professional advice with regards to your mortgage as soon as you can, so that you are aware of what you are able to borrow as an individual,” says Brian Murphy, Head of Lending at the Mortgage Advice Bureau.
Properties jointly owned by married couples
If you separate having been married, you are automatically entitled to a share of your partner’s assets. This means that you have a legal right over your home even if you are not the legal owner. This principle will underpin any divorce settlement.
Properties jointly owned by couples in a civil partnership
If you are in a civil partnership, you have no automatic rights over a property in which you live with a partner if they are the sole owner of the property. But you can, in those circumstances, formally register your home rights with the Land Registry. That will prevent your partner being able to sell the home without your permission in the event of a relationship break-up.
Properties jointly owned by couples who are not married but in a relationship
If you are buying a property with someone whom you are cohabiting, particularly if you are planning to take out a joint mortgage, it can be sensible to sign what is known as a cohabitation agreement beforehand. This can help if you require a joint mortgage separation when not married. Otherwise, in the event of a relationship break-up, your legal position will be far less clear-cut than if you were a married couple or civil partners.
“A cohabitation agreement can record who is bringing what assets into the relationship, how any property acquired during the relationship should be owned and who will be responsible for what during the relationship,” explains Ben Evans, Senior Associate at Slater and Gordon lawyers. “The agreement can provide a framework for what will happen in the event of a separation. Think of it as an insurance policy – something you hope you never have to use, but is there for your peace of mind.”
Sadly, few relationship break-ups come without pain. But if you acquaint yourself with your legal position, and take prudent practical steps, you will be better equipped to extricate yourself from a difficult situation than if you hope that things will sort themselves out.
Professionals such as solicitors, mortgage lenders and the Citizens Advice Bureau will be well placed to give you the important detailed advice you need.
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