Dividing the family home and mortgage during divorce or dissolution

Your home is likely to be the biggest purchase you make in life, and so it will be one of the primary considerations if you are going through a divorce. There is the obvious financial investment both parties have made, but home has emotional ties too, especially if you have children.

Dividing the family home and mortgage during divorce or dissolution

Divorce brings up many challenges, how and where your children will live in the future is the most important. However, separating your financial lives is essential too. As the divorce proceeds, dividing assets finances can become extremely complex, but none more so than your home. 

With most of us having a mortgage in joint names, there is the matter of dealing with that debt where at least one person will have to be taken off the mortgage, and how you divide the property itself.

How you divide up the family home is a significant part of that divorce settlement then, but what are your options for dealing with it?

Are you keeping the property?

The first question when looking at dividing the home and dealing with the mortgage is if either party wishes to stay in the property. For a parent with custody of children, especially younger ones, staying in the home and reducing the disruption may be the best option. 

In other circumstances, one person may be best positioned to take over the property or have a connection that makes sit sensible to maintain ownership. For others, the clean break may suit them best, but in each case, how can you effectively split the property cost and mortgage?

In either case, the mortgage will have to be dealt with. If one of you is keeping the property, then the mortgage needs to be transferred to a single name. This is important, as if left in joint names, it can prevent the other party from obtaining a new mortgage for their next home. 

Buying the other party out

If one of you wishes to remain in the property, the most straightforward approach is to buy the other person out. Take the value of the property less the mortgage balance owed, and the difference is the profit locked into your home. Buying out your ex-partner means giving them their agreed share of that profit. Whether that is a cash payment, you finance it when you transfer the mortgage to a single name, or the balance is given through other assets, you are left with the property, and the other party has been financially compensated.

It is an excellent option for situations where one person is looking to stay in their home, and the other party needs funds to find their property.

Deferred Sale

For some, there may be financial difficulties in buying the other party out, or both parties are in apposition where selling is not a priority. In this case, a deferred sale can be an ideal solution. It allows one party to remain in the property after the divorce until an agreed event. This could be if they remarry, or when the children have reached a certain age or finished their education. If there are children involved, this will usually be the parent with custody who remains.

At that specified event, the house will then be sold, and profits divided up between the two parties as agreed. This can be arranged mutually between the two parties in amicable negotiations or can be a decision from the court, where it is known as a Mesher order.

The advantage here is continuity for children and less complex financial arrangements for both parties. The nature of the housing market means that in most cases, each party will eventually receive more funds than they would be selling immediately too, although that cannot be guaranteed.

If there is a mortgage, it is advisable to transfer to the single name of the party remaining in the property to avoid complications elsewhere.

Selling the property

If there is no agreement to be reached about one party retaining the property or both are looking for a clean break and do not wish to stay, selling the property makes sense. There is nothing complicated about selling. However, it is essential to agree on how the profits from the property will be split before it is put up for sale. This could be a mutual agreement, or it could be court advised, but however it is agreed, ensure both of you know the outcome before you begin.

Once the property is sold, the remaining balance of the mortgage is paid off, and all legal fees accounted for, what is left is then divided up between the two parties as agreed beforehand. This offers the most natural approach, and in many situations, is the ideal solution. It does mean both parties have to start again in a new property, and for children, this can be an additional upheaval in a difficult time. 

Who gets what?

The big question then is how you divide up the profits of a sold property, or how you decide how much one person needs to pay to buy the other out. While simply splitting everything 50:50 is common, it is not the only option and in some circumstances is not going to be the fair approach either.

Courts will take into account contributions, whether the property was owned by one party before the marriage. Then, they will come to a reasonable decision on how the value of the property should be divided.

With these options available and careful consideration about the unique situation of each party, a fair and appropriate solution for dividing your property can be reached during any divorce

Key Takeaway

If you are looking at a divorce yourself and would like to ask any questions about your situation, or you are seeking guidance on your home or any other aspect of a potential divorce, we are here to help. Our experienced team can help you find the right approach that will ensure you have the right result to begin your new life. Contact a divorce solicitor on Qredible.co.uk and let them help you find that new life.

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