The generally accepted logic is that spouses either mutually agree to ‘get through one more Christmas for the sake of the family’ then start the separation process as soon as they can after the holidays once their children are back at school, or conversely, the stress and angst of the festive season drives one partner to make the final decision that the relationship is over, and seeks advice on how to proceed.
The most recent data available from the Office of National Statistics reports that there was a total of 107,071 divorces in 2016 although this doesn’t account for long term co-habiting couples who went their separate ways last year but weren’t actually married.
Divorce rates are currently lower the recent peak in divorce rates seen in 2003 and 2004, however anecdotally, many experts suggest that the cost and difficulty around getting back on the property ladder following a split is a contributing factor to a rising number of couples staying together not so much for the sake of the children anymore, but more the ‘sake of the mortgage’. Given such a background, for many facing separation or divorce, the marital home usually represents one of the major points of litigation and trauma, both emotionally and financially.
As Brian Murphy, Head of Lending for Mortgage Advice Bureau explains, “The latest mortgage legislation and changes to Stamp Duty (SDLT) have made it more costly and difficult for some of those who have to split proceeds from the sale of the family home to buy two properties, or perhaps remortgage in order to buy the other party out.
The first Monday of the new year annually has been termed ‘Divorce Monday’
Currently, there is no such thing in law in this country as a ‘common law’ husband or wife
“Whilst lenders are, of course, sympathetic to those finding themselves in this position, due to the way that affordability is now assessed, it’s worth getting professional advice with regards your mortgage as soon as you can so that you’re aware of what you are able to borrow, as well as your rights with regards to your property in terms of your individual circumstances.”
So, what are the basics that you need to know about mortgages if you’re heading for the Solicitor?
Q: When my ex and I got together, I moved into the property that he already owned. I never went on the mortgage or the deeds, and we had an informal agreement with me giving him some money as a contribution towards the housekeeping every now and again. Do I have any claim in terms of the equity in his property?
A: Sadly, this is one of the most common misapprehensions around co-habitation. Currently, there is no such thing in law in this country as a ‘common law’ husband or wife, regardless of how long you live together.
Therefore, unless you have made specific legal arrangements or are on the deeds of a property, in most instances if you haven’t had children together and are co-habiting but not married or in a civil partnership, you will have no claim on the property owned by your ex when you split up.
If you do have children together but are not married or in a civil partnership, then the law is slightly different so it’s best to get legal advice as soon as you can as to what your partner’s responsibilities are towards you and your children.
Q: If I transfer the property over to my spouse, am I still responsible for the mortgage?
A: Even if you have completed a TR1 form and transferred the title deed from two names to one, this doesn’t necessarily mean that the matter is completed and you are no longer responsible for paying the mortgage.
If you were both named on the mortgage, you are both jointly and severally liable for mortgage payments until such times as your name is removed from the mortgage with your lender’s consent. In simple language, that means in the event that your ex doesn’t pay their share of the mortgage, you would have to pay all of the mortgage payment to avoid being in breach of your mortgage agreement, which could have an adverse effect on both of your credit ratings, as well as putting you in a position where your lender could potentially instigate repossession proceedings.
In order to have your name removed from the mortgage, your ex-partner would need to apply for and be granted a mortgage for the entire amount outstanding based on their own income.
Most family law solicitors offer an initial thirty minute consultation for free
Q: I need to get a mortgage on my own; I work full time, but I pay my ex-partner maintenance for our children. Will a Lender reduce the amount that I can borrow because of this?
A: The short answer is most probably yes.
Getting a mortgage is based on your ability to afford the repayments and, as with any other committed outgoings e.g. Utilities, loan repayments etc., a Lender will count any child or spousal support as a committed expenditure.
Q: I’m moving out of the marital home and buying another property to live in, how does this work with regards a mortgage and Stamp Duty on my new property?
A: There are a couple of factors you’d need to consider; the main one is if you are going to continue to be jointly named on both the deeds and mortgage of the main marital home, for example if you are providing a home for your ex and any children until they are 18 and are going to be responsible for all or part of the mortgage payments.
If that’s the case, then the property you’ll be buying to live in yourself will, in the eyes of most lenders and HMRC, be classed as a ‘second property’.
That means, as part of the mortgage affordability testing process, you will need to evidence that you can pay all of the mortgage on both properties, for example in the event that your ex can’t make their contribution to the property that they live in with the children, due to illness or losing their job.
It also means that you may have to pay the additional Stamp Duty levy of three per cent on the property you are buying to live in yourself, due to the fact that it’s classed as a second property, unless you apply for an exemption from HMRC. To do this, you will need to provide legal evidence that you’re formally separated from your ex-partner or divorced. You can find out more on what the requirements are and now to apply for the exemption on www.gov.uk.
Whilst separation and divorce are undoubtedly a heart-breaking time for many, it’s critical that you understand as soon as possible what rights you may have regarding your individual situation, even if you don’t think you have any claim to the property; it’s best to be prepared up front so you know what you’re dealing with and can then plan accordingly. Hard as it may seem, it’s best to bite the bullet and find out what your options are sooner rather than later, particularly if children are involved.
Most family law solicitors offer an initial thirty minute consultation for free, so it’s worth making a list of any specific questions you have so that you can make the most of the time you have with them, as it’s easy to forget to ask about things if you’re feeling stressed and emotional.
You can find a solicitor near you by searching on the Law Society website at www.lawsociety.org.uk.
Getting a mortgage is based on your ability to afford the repayments
It’s also best to contact your mortgage lender as soon as you possibly can to let them know about your situation so that they are aware of what’s going on, and can work with you if necessary to help in the short-term whilst you’re agreeing next steps with your ex.
They can also advise of any redemption penalties you may be liable for if you decide to make a clean break and sell the property, which you will of course need to factor in alongside estate agent and conveyancing fees in terms of dividing any equity if that’s the route you jointly decide to pursue.
If there is any potential positive around property assets in the event you and your spouse are going your separate ways in 2018, according to the Office of National Statistics figures, the average marriage lasts twelve years prior to divorce. Which means hopefully, at least if you are splitting assets, you may have seen a significant uplift in the value of your property during that time.
As the old Monty Python song goes, “always look on the bright side…”