What are my divorce and mortgage buyout options?

Divorce is a challenging time, both emotionally and financially. One of the biggest concerns for joint owners is deciding what to do with their shared home. Should you sell the property, assume the mortgage, or remortgageRefinancing an existing mortgage with a new mortgage. to buy out your partner?

Divorce rates in the UK have been climbing, said a report in the Telegraph newspaper on the 17^th of April 2020 Indeed, a story in the Evening Standard on the 6^th of January 2020 revealed the staggering statistic that, in that week, the volume of online searches for “I want a divorce” was 230% higher than in the first week of January just the year before.

Understanding your divorce settlement options, including mortgage responsibility, transfer of ownership, and the financial implications, is crucial. This guide will walk you through the buyout process, loan assumption, mortgage deals, and key legal and financial factors.

What Happens to a Mortgage During Divorce?

Understanding Your Mortgage Responsibility

If you and your partner have a joint mortgage, you are both legally responsible for making the monthly repayments. If one partner wishes to remain in the home, they must explore viable options such as:

✔ Loan assumption – Transferring the mortgage agreement into one person’s name.

✔ Remortgaging – Securing a new loan to remove one borrower.

✔ Selling the home – Splitting the equityThe difference between the value of the property and the amo... share as part of the financial agreement.

Selling the Home: The Simplest Option

 How to Sell a Home After Divorce?

Selling the home is often the easiest solution, especially if the couple cannot reach a mutual agreement on ownership shares.

Key Steps in Selling:

1. Property valuation – Determine the current market value.

2. Settle the mortgage balance – Pay off the outstanding mortgage balance with the sale proceeds.

3. Divide the equity – Ensure a fair split based on the divorce agreement.

4. Consider tax implications – Selling may trigger Stamp Duty or capital gains tax.

If the home is in negative equityA situation where the value of the property is less than the..., you may need to negotiate with the mortgage provider to avoid extra financial burden.

Mortgage Assumption After Divorce

What is Loan Assumption?

A loan assumption allows one partner to take over the current mortgage without refinancing. This is useful if the mortgage rate is lower than the current market trends.

However, the assumption process requires:

✔ A credit check and affordability assessment.

✔ Approval from the current lender.

✔ A legal agreement to transfer the financial responsibility.

⚠ Assumption fees may apply, and not all mortgage servicers allow this option.

Remortgaging to Buy Out Your Partner

What is a Mortgage Buyout?

A mortgage buyout involves refinancing the original mortgage to remove one partner’s name and transfer sole ownership to the remaining partner.

How to Remortgage for a Buyout?

1. Check eligibility – Lenders assess your credit file, income ratio, and financial standing.

2. Get an accurate valuation – A property valuation is needed to determine the equity split.

3. Secure a new mortgage deal – Compare mortgage products based on your financial circumstances.

4. Settle legal responsibilities – A legal document is required for the transfer of equityTransferring ownership of a property from one party to anoth....

5. Complete the remortgage – The current lender pays off the previous lender, and ownership is transferred.

If you need additional funds to buy out your partner’s share, you might alternatively consider remortgaging the home.

What Are the Costs of a Mortgage Buyout?

A successful mortgage buyout involves several additional costs, including:

• Closing costs

• Repayment charges

• Legal fees for title deedsLegal documents that prove ownership of a property. transfer

• Stamp DutyA tax paid by the buyer when purchasing a property. (if applicable)

Using a remortgage broker can help you find the best mortgage arrangement.

Court orders

To a large extent, the options described so far rely upon a degree of agreement between the parties involved. If this is absent, then the courts may be asked to intervene.

Among the orders that the courts have at their disposal are:

Mesher orders

•  Mesher orders – also known as orders for deferred sale – involve the court deferring the sale of a marital home until a particular date or event, which might be set at the date on which the youngest child turns 18, for example; or

Martin orders

• Martin orders are similar to Mesher orders in so far as the sale of the marital home is deferred, but, in this case, delayed so that one party – typically the one with insufficient financial means to re-house themselves – may continue to live in the property until they die or re-marry.

In either of these cases, of course, the transfer of an existing joint mortgage may be required, a new mortgage arranged, or a remortgage negotiated.

Alternative Mortgage Options After Divorce

If you cannot remortgage to buy out your partner, other mortgage options include:

Guarantor Mortgage

A family guarantorA person who guarantees to repay a mortgage if the borrower ... mortgage allows a family member to co-sign, helping with approval.

Springboard Mortgage

A springboard mortgage lets a family member deposit savings as security instead of being a co-borrower.

Conventional Loan vs. Specialist Mortgages

A conventional home mortgage is ideal for those with a stable credit history, while specialist mortgage brokers can help those with bad credit.

Can You Get a New Mortgage After Divorce?

Affordability Checks and Credit Reports

Lenders will review your annual income, credit file, and income ratio to assess mortgage eligibility.

Applying for a Mortgage Post-Divorce

✔ Gather financial documents like tax returns and pay slips.

✔ Check your credit history and address any issues.

✔ Choose the right type of loan based on your economic circumstances.

 Fannie Mae and Freddie Mac offer mortgage assistance for those in financial hardship.

FAQs About Divorce and Mortgage Buyout Options

Can I assume the mortgage after divorce?

Yes, but the mortgage holder must approve the loan assumption and conduct a credit checkA check of a borrower's credit history, which is used by mor....

How do I calculate a house buyout in a divorce?

The equity share is based on the property price minus the mortgage balance.

Can I remortgage to buy my partner out?

Yes, provided you pass the affordability checks and secure a successful mortgage buyout.

What happens if one partner stops paying the mortgage?

Both parties remain liable until the mortgage agreement is changed.

Can I buy my ex out before the divorce is finalised?

Yes, but consult a legal professional to ensure a fair split of assets.

Conclusion

Navigating divorce and mortgage buyout options is a complex process. Whether you choose loan assumption, remortgaging, or selling, seeking professional advice is key to making the best decision.

If you need guidance, a specialist mortgage broker can help you explore plenty of options suited to your financial standing.