What happens to a mortgage when you divorce?

For most couples facing divorce, the home is the most valuable asset. Deciding what to do with the marital home and how to settle any outstanding mortgage can be a source of great concern.

Understanding what happens to a mortgage when you divorce is important when negotiating the distribution of assets and the family home.
Understandably, this can be a very difficult time for everybody involved.

In April 2022, ‘no fault divorce’ was introduced for the first time. This allowed marriage couples to start divorce proceeding without apportioning blame – and sparked a huge increase in divorce applications.

Before the change in the law, couples had to site adultery, unreasonable behaviour or desertion as a reason, or demonstrate they had been living separately for five years, in order to get divorced.

However, the process of getting divorced can still be challenging and couples may still disagree on how to divide their assets.
Any outstanding mortgage on the property must be paid off or transferred to one of the partners.

Most couples will probably have a joint mortgage from when they bought their marital home. Although, in some cases, one of the partners might have owned the home already.

The family home will have history and have emotional significance. It could be the place where you started a family or have been raising your children.

In this article we will look at some of the possible scenarios and resolutions you could face with a mortgage during and after a divorce.

It is highly advisable to seek expert advice from a divorce solicitor if your marriage is coming to an end or you are working out a settlement. A legal advisor can guide you through the process and ensure that your rights are protected.

For further help please get in touch with Austin Kemp Solicitors by email or by phoning 0333 311 0925.

Who pays the mortgage while we are getting divorced?

If you have a joint mortgage with your spouse, then both of you are responsible for the debt until it is paid off or one of your names is removed from the mortgage.

Even if one of you moves out of the house, you are both liable for the repayments until you reach a settlement and find a long-term solution.

It can take time to sort out your finances during a divorce and selling a home is never a quick process. It’s likely one of you will want to move out during the divorce process.

The average UK divorce takes from four to six months to complete, from the initial petition to decree absolute.

Any missed payments during that period will affect both of your credit scores and could lead to the house being repossessed. A negative impact on your credit score will make it harder to secure a new mortgage if you want to buy a new home.

It is wise to contact your mortgage lender as soon as there is any potential disruption to the payments and let them know you are facing a divorce.

Inform your mortgage lender as soon as you have any concerns about being able to pay the mortgage or if you fear that your spouse might fail to make their payments.

Most lenders will show sympathy and will consider granting you a payment holiday while matters are resolved.

Remember though that the outstanding debt will increase because the interest on the mortgage will still accumulate monthly.

What if one of us is the sole owner?

Even of one of the partners is registered as the sole owner of the family home, the other spouse may have rights to live there and a claim to the property.

The courts will regard the marital home as a join asset and the ‘owner’ cannot force the other person to leave. Your home forms part of the marital assets which will be divided as part of any financial settlement.

Some couples will reach an agreement between them, while others will seek help with mediation. Many couples will need a court to decide for them.
If one person owned the property before the marriage, then the other spouse will have less of a claim on it.

If you are not named on the mortgage or the deeds, you can protect your rights to live there by registering a Notice of Home Rights with the Land Registry. This protects your rights to occupy the matrimonial home until your divorce is finalised. Your spouse will not be able to sell the property without you being notified.

For further help please get in touch with Austin Kemp Solicitors by email or by phoning 0333 311 0925.

How will the home be divided in a divorce?

There are various options when it comes to the marital home during a divorce. Each of these will require a different mortgage route. The priority is to settle any existing mortgage, so it is paid off or transferred into one name only.
Here are the most common outcomes:

Sell the house and both move out

The cleanest resolution is for both spouses to move out of the property, sell it and pay off the mortgage. Any equity left once the debt has been paid off will be considered a marital asset and divided according to the settlement.

This may provide both partners with means to find new accommodation.

Couples must decide between them who should get what. If it is impossible to reach an agreement you will need to seek mediation or ask the courts to decide. If children are involved the court will seek a settlement that causes as little disruption to them as possible.

It is important to seek legal advice to protect your rights throughout the process of selling a home in a divorce.

One spouse buys the other out completely

If only one of you intends to stay at the property, you could transfer sole ownership to the occupier. This would usually require the person staying to buy out their partner’s equity and to take over the outstanding debt in full.

The person staying will have to meet the lending requirements for the existing mortgage provider and prove they can afford to take on the whole mortgage. Alternatively, they might seek a new mortgage with another lender.

This is a common resolution when there are children involved. The court will always look to ensure that children’s lives are disrupted as little as possible – and that the children have somewhere to live with each parent.

To buy your ex-partner out of a mortgage you will need to re-mortgage the property with the existing lender – or find a new mortgage. You will need enough monthly income to pay the higher monthly sums.

Transfer part of the home’s value

You could transfer a proportion of the equity in the property from one spouse to the other. This might be an option is the person staying in the house does not have the means to completely buy the other person out. The person who stays becomes the only name on the mortgage. The partner who moves out would still be entitles to their remaining percentage or ‘interest’ when the house is sold.

A licensed conveyancer or solicitor can assist with the transfer of equity. But you should get independence financial advice before any change of ownership.

For further help please get in touch with Austin Kemp Solicitors by email or by phoning 0333 311 0925.

One person stays but still in joint ownership

Another option is to continue paying the mortgage between you and to continue as joint owners even though one person moves out. This requires the couple to remain on good terms. This scenario is good for the stability of children who can continue to live in the family home.

Sometimes a couple will agree to a Mesher Order through the courts which will state that the home cannot be sold until after a certain time, for example when the children finish school. It can also be used to give one person the right to stay in the house until they remarry or until they die.

What if I can’t afford a new mortgage?

The unfortunate reality of a separation is that there will be limited assets and earnings. Both partners may have to downsize and it might be difficult to get a mortgage.

If resources are stretched it may be possible to take out a ‘guarantor’ mortgage.

This is when a close relative, or even your ex-partner, offers to guarantee the mortgage payments if you can’t make them.

The guarantor signs a legally binding contract to say they will take responsibility for the outstanding debt if there is a problem.

This is a serious undertaking and it’s important that any potential guarantor takes legal advice.

Some lenders allow a ‘joint borrower sole proprietor’ or JBSP mortgage. This is when two people contribute to the mortgage but only one person is named on the title deeds.

This allows a parent or family member (or even the ex-partner) to help with the mortgage payments without being an owner of the property. The advantage of this is that the other person will not be liable to any stamp duty – only the person on the title deeds.

A guarantor mortgage is different from a JBSP mortgage because the guarantor only becomes liable for the debt if the owner cannot afford to make the payments. They will be responsible for the debt without becoming the owner of the property.

What if our house is in negative equity?

Negative equity is when the house is worth less than the remaining value of the mortgage. In other words, if you were to sell the house, you would not be left with enough money to pay off the debt.

Although the long-term historic trend has been for UK house prices to go up, they do go down as well.

No-one chooses to time a divorce according to the fortunes of the property market. It is possible you could find yourself in negative equity.

In this situation it may be advisable for one or both of you to hold on to the house until the property market recovers and the home increases in value.

One spouse could buy the other one out at the current valuation. Or you could agree to transfer part of the equity or continue to pay the mortgage together for the time being.

A specialist divorce lawyer can help to advice on the best course of action.

For further help please get in touch with Austin Kemp Solicitors by email or by phoning 0333 311 0925.

If there is no option other than to sell the house for a loss, then you will have to divide the debt as part of the financial settlement.

What if we can’t agree a settlement?

If you and your partner cannot come to an agreement between you on how to split the family home plus any other marital assets, you may have to go to court.

Before reaching that stage, you can try mediation. This involves both spouses attending sessions with an independent third party who will help you to reach an agreement.

An alternative is known as collaborative law, when both parties and their respective solicitors meet to discuss the property settlement and other issues.

If that does not work, the last solution is to go to court.

The court will consider the needs of any children and will also examine the financial circumstances on both sides. A Form E is the document used to set out the financial position of the two spouses.

This will include any pensions, savings and investments – plus money owed on loans, overdrafts and credit cards.

It can also include furniture and appliances, vehicles and other properties.

Businesses are also considered to be matrimonial property. All the shares held in any limited companies, even if only one of the partners is involved, will be divided. Or a court can order to sell the whole company.

The court will consider how long you have been married, your standard of living plus your income and earning capacity.

The guiding principle of the court will be to make the settlement as fair as possible. The old-fashioned concept of a punitive divorce, where one side is punished for their actions in the marriage, does not apply.

You must never attempt to hide any money in a divorce. Both parties are expected to make full and frank disclosures of their finances. Withholding any information can have serious consequences.

If things have reached this point, you will need the advice and support of a specialist divorce lawyer. They will ensure that you achieve the best outcome in any divorce settlement.

For further help please get in touch with Austin Kemp Solicitors by email or by phoning 0333 311 0925.

What if can’t agree to sell the house?

If only one partner wants to sell the family home, you may need to seek a court order – known as a Property Adjustment Order.

These orders are legal documents which state what should happen to the family home. The court might say to transfer the property immediately or transfer the property later.

If you are unable to come to an agreement you can ask the court to make a Financial Order, detailing how you will deal with your finances upon divorce. This will require a number of court hearings, where your respective legal teams will negotiate a settlement.

One of the most common types of financial order is a Consent Order. This is the document which details how your join assets will be divided. This document will detail the sale or transfer of any property.

It could also include clauses which deal with savings, debts, personal belongings, child maintenance, spousal maintenance, lump sums, business assets and pensions.

If the split is amicable a Consent Order is what makes the agreement legally binding.

Contact our expert divorce solicitors for advice

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More insights from family law specialists

• How do you work out divorce fees?
• How to make the divorce process cost as little as possible
• How to protect finances during a divorce
• No-fault divorce UK – Guide
• What is a financial order in a divorce?
• Forensic accounting in divorce
• How long does a divorce take?
• What is the divorce process?
• When is decree absolute granted in a divorce?
• How much does a divorce cost?