Dividing the family home and mortgage during divorce or dissolution
If you are getting divorced or dissolving your civil partnership, one of the biggest financial decisions you could face is what happens to the family home. Find out what you need to do and what your options are.
- Securing the rights to your home
- Understanding how the home can be divided
- Prioritising the needs of your children
- Sorting out a joint mortgage
Securing the rights to your home
This article is aimed at separating couples who are trying to work out what to do about the family home. If you are in the early stages of divorce or the dissolution of your civil partnership and want some information about protecting your rights to live in the home, read our guide Protecting your home ownership rights during divorce or dissolution.
Understanding how the home can be divided
When you divorce or dissolve your civil partnership, there are several options you have about what you do with the family home. You may decide to:
- Sell the home and both of you move out. You could use the money you’ve raised to put towards buying another home for each of you, if you can afford to do this.
- Arrange for one of you to buy the other out.
- Keep the home and not change who owns it. One partner could continue to live in it, perhaps until your children are 18 or leave school.
- Transfer part of the value of the property from one partner to the other as part of the financial settlement. The partner who gave up a share of their ownership rights would keep a stake or ‘interest’ in the home. This means that when it is sold he or she will receive a percentage of its value.
Dividing the home in England or Wales
In addition to the options outlined above, a court in England or Wales can defer the sale of the home through what’s called a ‘Mesher’ order. This can put off the sale of the home until a specific event triggers the sale – for example, the youngest child turns 17 or 18. The net sale proceeds are then divided in accordance with the court order.
A court can also use a ‘Martin’ order to defer the sale of the house, but importantly it gives one person an entitlement to occupy the property for life or until remarriage. This is most often used where the couple don’t have children and the other person does not immediately need the money to put towards their own needs.
Dividing and valuing the home in Scotland
The value of your home will be taken into account when working out your financial settlement if you bought it after you married or became civil partners, or if you both lived in it as a family home before the marriage or civil partnership.
If you decide to transfer the home to one of you, it should be valued on a date that you and your ex-partner (husband, wife or civil partner) agree between you. Normally, you’d choose a date as close as possible to the date of the transfer.
Prioritising the needs of your children
Although most couples who divorce or dissolve their civil partnership don’t go to a full court hearing to settle financial disputes, it’s a good idea to have an understanding of what the courts would decide in respect of the family home.
If you have children, especially if they are young, the court will take into account the fact that they need somewhere suitable to live with each parent.
The approach taken by the court does vary slightly around the UK and the eventual outcome will also depend upon your own individual circumstances.
As parents, it’s important to keep the needs of your children uppermost in your minds at all times during a divorce or dissolution. This includes trying to disrupt them as little as possible. However, many families will experience some “downsizing” as a result of a divorce or dissolution.
Sorting out a joint mortgage
Many couples who have a joint mortgage and who divorce or dissolve their civil partnership try and sort out the mortgage so that only one partner has their name on it. Whether this is possible will depend on the couple’s financial circumstances. The advantages of doing this are:
- The person whose name is taken off the mortgage should be able to borrow more to buy themselves a home than if their name was still on their ex-partner’s mortgage.
- The person who stays in the house doesn’t have to rely on their ex-partner for their mortgage.
- Both partners may be able to break the link that ties their credit files together. If you have a joint debt with your ex-partner (such as a mortgage or a loan), your credit files are connected. That means how you manage your debts will affect your ex-partner if he or she applies for credit, and vice versa.
Talking to your mortgage lender
If you want to take over the mortgage in your name alone, the lender will want to make sure that you can afford the payments.
Under Financial Conduct Authority (FCA) rules, lenders must ask in-depth questions and carry out more checks to make sure that you can afford a mortgage.
Options if you can’t afford the mortgage on your own
If you can’t afford to take over the mortgage, you may be able to get a ‘guarantor mortgage’. This is a mortgage where a close relative (or your ex-partner) agrees to guarantee the mortgage payments if you can’t.
Becoming a guarantor is a serious legal step as it means you are responsible for paying the whole mortgage if the mortgage borrower cannot. Make sure the would-be guarantor takes independent legal advice and talks to a mortgage broker before they agree to anything.
Your next step
Find out about a clean break or spousal maintenance in England, Northern Ireland or Wales, or a clean break or periodical allowance in Scotland as part of your divorce or dissolution financial settlement.