Dividing the family home and mortgage during divorce or dissolution

When you divorce or dissolve your civil partnership, you have several options about what you do with the family home.

You might decide to:

1. 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.
2. Arrange for one of you to buy the other out.
3. 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 (if you have any).
4. 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’s sold, they’ll receive a percentage of its value.

As well as the options 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 turning 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. This 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 doesn’t immediately need the money to put towards their own needs.

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.

You’d usually choose a date as close as possible to the date of the transfer.

The court’s aim will be to divide shared property in a fair way that makes sure everyone’s needs are met. The Matrimonial Causes Order sets out the range of powers the court can use when deciding how to split assets.

They include:

• ordering the sale of a property
• transferring property from one spouse to the other (or to children)
• transferring a property from joint name to a sole name
• allowing a spouse or child to use a property up to a specified future date
• allowing a spouse or child to stay in a property for life or until a “trigger” event (e.g. when a spouse remarries).

Most couples who divorce or dissolve their civil partnership don’t have a full court hearing to settle financial disputes. But it’s a good idea to understand what the courts would decide about the family home.

If you have children, especially if they’re 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. The eventual outcome will also depend on your individual circumstances.

As parents, it’s important to always prioritise your children’s needs during a divorce or dissolution. This includes trying to disrupt them as little as possible.

But many families will need to ‘downsize’ as a result of a divorce or dissolution.

Many couples who divorce or dissolve their civil partnership and have a joint mortgage, try to 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:

1. 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.
2. The person who stays in the house doesn’t have to rely on their ex-partner for their mortgage.
3. Both partners might be able to break the link that ties their credit files together. If you have a joint debt with your ex-partner – for example, a mortgage or a loan – your credit files are connected. That means how you manage your debts will affect your ex-partner if they apply for credit, and vice versa.

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.

If you can’t afford to take over the mortgage, you might 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 taking on the responsibility for paying the whole mortgage if the mortgage borrower can’t.

Before making a decision, it’s important that anyone considering being a guarantor:

• gets independent legal advice, an
• talks to a mortgage adviser before agreeing to it.