January is the most likely month for unhappy couples to call it quits and start divorce proceedings, statistics show.
Anyone who has gone through the process will know there are a raft of decisions to be made and paperwork to be sorted, aside from the emotional distress.
This might include how to split up savings or pensions, whether one partner will pay the other maintenance, and how to share the responsibility of looking after any children, or even pets.
For many, their single largest asset is the family home – on which they might well still have a mortgage to pay.
Breaking up: One of the hardest decisions for many couples is what to do with their home
This is Money asked experts what couples – as well as friends or family buying together – can do to make the process as easy as possible should they no longer want to live together in future.
We also explain what the options are for dealing with your home or mortgage once you have decided to divorce.
How to protect yourself when buying a home together
Be open about your finances
One piece of advice offered up by nearly all of the experts we spoke to was to start the home-buying process with a frank conversation about your finances.
This applies whether you are buying with a partner, spouse, friend or family member.
‘Before you buy with a partner or group, sit down and talk openly about your respective finances,’ says Sophia Guy-White, co-founder of first-time buyer mortgage lender Generation Home.
‘The reality is that individuals rarely have identical financial situations and contribute equally.’
This can become even more complicated when someone’s parents are contributing to the deposit for the new home, for example.
They should be included in these converations too, so that everyone is on the same page about where the money is coming from and what they will be expected to contribute to the property purchase, ongoing mortgage payments and upkeep.
Before you make an offer on a home, have an honest chat about what each partner, friend or family member can afford, and how the property and mortgage payments will be paid for
Sign a Declaration of Trust
If joint property buyers are not contributing equal amounts to the deposit or mortgage payments, it is a good idea to sign a Declaration of Trust.
Also known as a Deed of Trust, this is a legal document drawn up by a solicitor. It sets out how any equity would be divided if the property was sold, or remortgaged to remove one party from the deeds, in future.
Marilyn Bell, partner and head of the family law team at SA Law, says: ‘It can provide for a specified sum, or percentage, to be paid first to the larger contributing party before dividing the rest equally.’
This applies to both couples, and friends or family buying together.
In the case of a divorce, the court does have the power to make a different order to what is specified in the Declaration of Trust.
However, Bell says it is still ‘well worth doing’ as the document can be used as evidence in such cases.
It is important to document any money spent on the home, to avoid arguments over who paid for what in the event the relationship falls apart. Such disputes can result in hefty legal fees
It can be especially useful if one party’s parents are gifting or lending a couple money towards their deposit, to avoid future disputes about whether their ex-partner needs to pay them back.
Homeowners should make sure the Declaration of Trust is updated if one party starts contributing more or less to the cost of the home, or if significant money is spent on the property – for example building an extension.
Says Bell: ‘It is common in property disputes – when two owners fall out – for claims to be made as to who paid what, and numerous receipts produced from tradespeople and DIY shops.
‘This can lead to the other person claiming that they paid for a holiday, which represented their half of monies towards the property. All this leads to very expensive legal costs and often unsatisfactory outcomes.’
Something in common: Friends clubbing together to buy a home may prefer to be registered as tenants in common, as this clearly sets out how much of the property each of them owns
Joint tenants or tenants in common?
When two or more people record a property purchase with the Land Registry, they have the option to either register as ‘joint tenants’ or ‘tenants in common’.
Brian Murphy, head of lending at Mortgage Advice Bureau, explains: ‘If you choose to be joint tenants, you will both own an equal share of the property.
‘If one of you dies, your share is passed to the other tenant, and if you take out a mortgage, it’s a joint one.’
There are two main benefits to being tenants in common. First, the shares each owner has in the property do not have to be equal.
Instead, they can specify the percentage or monetary value in the home that belongs to them at the outset.
‘For instance, if one of you earns more, you could choose to pay more towards the house and have a greater share,’ Murphy explains.
You can still be tenants in common if you do have equal shares.
This is especially useful for friends who are buying a home together, as it clearly defines who owns what, and gives the owners more options when it comes to selling or passing on their stake.
The other benefit of being tenants in common is that, if one party dies, their share in the property does not automatically pass to the other co-owner. They can leave it to someone else by including this in their will.
With a joint tenancy, the ownership would automatically pass to the other party – even if the deceased had specified otherwise in their will.
This could be an issue if one partner in a divorced couple did not wish to pass their share of the home on to their ex-spouse.
If you start off as a joint tenancy, this can be changed by notifying the Land Registry.
Contributions to a property can also be detailed in a pre-nuptial agreement, though these are not yet legally binding in England.
Making payments towards your home from separate bank accounts can help to avoid arguments about who paid for what, in the event that a relationship later breaks down
Keep track of who pays what
It may not feel especially romantic, but it is also a good idea for each member of a couple to pay their share of home-related costs from their own bank account, rather than transferring it to the other partner for them to pay in full.
This creates a paper trail which can avoid disputes over who paid for what if the relationship later breaks down.
Says Bell: ‘It is always well worth documenting contributions to purchase, and to the mortgage in a straightforward way.
‘For example, each party can pay the conveyancing solicitor from their own bank account. They don’t have to muddy the waters by transferring it from one to the other before the recipient pays the solicitor.’
You can’t ‘divorce-proof’ your home entirely
While the above are all useful steps to take, many of them rely to an extent on a break-up being relatively amicable.
‘These legal remedies are unlikely to withstand an acrimonious divorce in court, especially if there are children involved,’ says Scott Taylor-Barr, financial adviser at Carl Summers Financial Services.
These legal remedies are unlikely to withstand an acrimonious divorce in court, especially if there are children involved
Scott Taylor-Barr, financial adviser
And whatever steps you take to divide up your property ownership, your mortgage lender will still regard anyone named on the mortgage as having joint liability – meaning that if one partner doesn’t pay, the other will be forced to do so or risk damaging their credit rating.
‘Lenders have for many, many years lent mortgages on a joint and several liability basis – meaning all parties to the mortgage are responsible for 100 per cent of it, not just what they see as their ‘share,’ Taylor-Barr adds.
‘One party cannot be released from their obligations under the mortgage unless the lender agrees to release them. No amount of paperwork between the borrowers can change this.’
Match your mortgage fix to your living arrangement
Given mortgage lenders’ stance on joint ownership, it pays to think carefully about how long you might live together, and match the length of the fixed mortgage rate to that timescale.
This is especially true of friends or family members, who might see living together as more of a temporary arrangement before one of them moves in with a partner.
In this case, a five-year fixed mortgage may be too long for example.
Adrian Anderson of property finance specialist Anderson Harris says: ‘We have arranged many mortgages for friends and siblings purchasing their first property.
‘We spend a lot of time establishing approximately how long they may live together or own the property.
‘We try and match the mortgage fixed rate with this predicted time-scale because the penalties associated with redeeming a fixed rate when the property is sold can be very expensive.
‘Don’t fix the rate for any longer than you think you may be living together.’
What happens to your home and mortgage when you divorce?
Both parties are legally liable for mortgage payments until the divorce is finalised
Once a marriage has broken down, one of the most pressing issues separating couples face is who, if anyone, will stay in the jointly-owned home, and how that will be paid for.
The Mortgage Advice Bureau has the following advice for those going through a divorce.
You can’t be forced out
As a spouse you have a matrimonial right to the home. Many separating couples choose to have one partner move out, but you don’t have to. Even if your spouse is on the title deed of the property, you both still have a right to live there.
If you’re worried about the house being sold from under your feet because your name isn’t on the title deed, register your interest in the property with a Notice of Home Rights. This prevents your ex-partner from selling the property before the divorce is finalised.
Don’t stop paying the mortgage
If you have a joint mortgage on your home, you’re both still legally liable for the payments right up until the divorce is finalised.
Neither of you should stop paying your share of the monthly repayments until the court agrees to your divorce, or you’ve agreed a different path (such as one of you buying out the other). A default on a joint mortgage repayment could seriously affect your chances of getting another mortgage.
Consider your options for moving on
You have a few options when it comes to your jointly-owned property.
1. Buy out your ex-spouse
If you have the money, offer to buy your ex out of their share of the property. If you don’t have the full amount, you can arrange to buy a percentage of their share now and they’ll receive the remaining percentage when you sell the property (or can pay them in full).
2. Sell the property and split the money
You could choose to sell the property and split the sale price proportionally based upon the percentage share you each hold. If your property sells for less than your remaining mortgage amount (called negative equity), you’ll have to split the debt between you.
If you and your ex remain on good terms, and you are not too far from the end of the term, you could agree to pay off the mortgage together
3. Pay off the mortgage together
You could both agree to pay your remaining shares of the mortgage, which is a straightforward solution if you’re nearing the end of the loan term and can afford the repayments. When the property is paid off, you can sell the house or the partner remaining in place could remortgage to buy out their ex.
4. Apply for a guarantor mortgage
Agreeing to repay your mortgage is usually reserved for amicable divorces. If your separation is acrimonious, and you want to stay in your family home, consider applying for a guarantor mortgage.
This is when you can’t prove that you can afford the full monthly repayments. A guarantor, such as a parent, underwrites the mortgage. If you don’t meet the repayments, they’re liable for them.
Who pays what?
To determine how much of the mortgage a judge would expect each partner to pay off, or the percentage of the sale price each is entitled to, you will need to consider what each partner has contributed to the home and mortgage over time.
Who paid the deposit, plus who contributes to bills, monthly essential expenditure, and the purchase and sale expenses of the property, will all affect your end entitlement.
But it is worth remembering that, when considering your divorce agreement, a judge will factor your input into the relationship as much as your joint finances.
Paying or receiving child support could impact your mortgage eligibility after divorce
Factor in child support payments
The spouse who ends up taking on the children after the divorce will be entitled to family support payments from their ex. This may affect who can afford to buy a new property or remain in the family home.
If you’re the spouse making payments this reduces your monthly capital, but if you’re receiving these payments, your monthly income will be larger and this can help with mortgage applications.
Speak to your mortgage adviser for more help
Make sure you’re looking at your options in detail before you agree to anything. You’ll also want to know how the planned financial split of the divorce would affect your ability to apply for a new mortgage on another property.
Therefore, it’s important to speak to your mortgage adviser to seek advice that clarifies this confusing time.
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