Considering joint mortgage separation rights can be challenging at the best of times without a full knowledge of the legal position.
Thankfully, the mortgage/property industry is well prepared for such scenarios with practices and advice that limit the distress in pursuit of a fair outcome for all involved.
There are specific legal rights for all parties involved in a joint mortgage upon separation.
In some cases, these rights can be complicated where children are involved with the courts keen to maintain a roof over their heads.
So, what are the factors to consider with regards to joint mortgages and separation rights?
Continue reading and get all the nitty-gritty details.
Civil Partnerships and Marriage, Are There Different Rights?
The law recognises both civil partnerships and marriage when it comes to issues such as separation and rights to various assets and funds.
Therefore, it makes no difference when looking at joint mortgages and individual obligations as to whether the couple lived together in a civil partnership or they were married.
What Are the Basic Property Related Options Upon Separation?
Before we look at the legal pros and cons of property ownership and separation, there are a number of basic options to consider:-
Sale of Property
The most obvious option will be to sell the property, repay the mortgage balance and split the surplus proceeds between the two parties.
Things can become a little complicated if the property is in negative equity. Assuming the property was still sold then each party would take on an element of the shortfall needed to repay the mortgage in full.
One alternative is to buy out your ex-partner assuming that you have the finances available. Remember, in the event of a separation, all assets and all funds will likely be split between the parties.
Therefore, you cannot bank on any significant savings built up during the relationship as a means of funding the buyout.
Retain a Share in the Property
In the event that one party wishes to maintain mortgage repayments, there is the option of putting aside a share of the property for your ex-partner.
This would be based on the value of the property and mortgage payments.
So let’s say it was agreed that they should retain a 25% share of the property, as and when the property is sold they would receive a 25% of share proceeds.
Repay Outstanding Mortgage
In the event that there is a relatively small mortgage outstanding on a joint property, it may make sense to work together, pay off the mortgage and then sell the property.
Then it would simply be a 50/50 split of the proceeds to allow a clean break.
Continue With Mortgage Payments
It may be that one party wishes to continue with the current mortgage arrangement but are perhaps not in a position to pass the affordability test.
The introduction of a guarantor could prove a game-changer as this would give the mortgage company a degree of protection in the event of default.
In theory, your ex-partner would still be entitled to an element of the property, but this would depend on the property valuation.
Who Covers Mortgage Payments Upon Separation?
Whether you are the party who was left the property or you are still living there, the sudden change in your financial situation can prove challenging.
In the event that you are unable to cover your share of mortgage payments, you will both need to approach your lender and discuss the situation in more detail.
Mortgage lenders understand that separations can be very stressful and challenging times and they may offer a degree of flexibility while long-term arrangements are put in place.
The main message here is, don’t bury your head in the sand and wait until you have started to miss payments!
What Is a Mesher Order?
A Mesher order relates to a family court order to prevent the sale of a property for a certain amount of time.
Typically this relates to partnerships where children are involved – as a means of maintaining a home for them. It may be that the Mesher order lasts until the children are 18, they finish further education or a later agreed point.
In this scenario, the joint owners tend to go their separate ways with one living in the property and bringing up the children.
While the Mesher order is in place, the property will still be held in the name of both parties even though one of them has likely moved out.
What Is a Martin Order?
This is a similar type of arrangement to a Mesher order, but there are no children involved. It is a court order which gives one of the joint owners an extended stay in the property which could cover their lifetime.
This arrangement tends to occur where the other party does not immediately require funds invested in the property. Martin orders often dictate that the property will not be sold until a person moves out, passes away or remarries.
The details of individual Martin orders will vary, but this is the basic premise.
Should I Take Financial/Legal Advice?
Upon separation, there will be numerous financial and legal issues to address and a strong argument for taking professional advice as soon as possible.
There may be ways and means of offsetting additional capital and assets built up during the partnership as a means of buying out one partner from the property.
It is also worth remembering that with a joint mortgage, your credit rating is at risk if the other party fails to maintain their share of mortgage repayments.
Ultimately, the mortgage company could call in and sell the property in the event of default, through no fault of yours.
There are various issues to take into consideration with regards to joint mortgages and separation rights.
It is vital to take professional advice both from a financial and a legal perspective to ensure that everything is done correctly and above board.
How Can The Mortgage Bank Help?
Here at The Mortgage Bank, we have partnered with some of the UK’s leading mortgage brokers.
They have already helped thousands of people get the best mortgage deal even people that have been refused before, and they can do the same for you.
Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.