When couples initially buy a home together, they are not thinking about what might happen if they divorce or go their separate ways. However, it is important to keep in mind that when you are jointly entering into a mortgage, separation or divorce, does not alleviate your responsibility for paying the mortgage payment. This is true even if you are the person who has moved out of the jointly-owned home. Under all circumstances, if you and your spouse or partner are both on the mortgage, your obligation to pay the mortgage, will not be suspended due to divorce or separation.
This can be particularly difficult in times of turmoil, such as those created by divorce or separation. The first step is to keep an open line of communication.
Sharing the Mortgage Payment
The following issues should be discussed with the advice of a solicitor and with your spouse/partner present.
- Gain a full understanding of what the monthly mortgage cost is. This can involve being a bit more careful if you have an adjustable interest rate on your mortgage. If you have a fixed-rate mortgage, then with the exception of changes in the tax structure for your area, the mortgage payment should remain consistent
- What accounts will the payment or payments come out of? Will you continue to have the payment come out of a joint account? Will you each make a payment from your separate accounts?
- What will you do if one of you misses their portion of the payment? Will there be a penalty for that individual applied via an agreement or the mortgage terms, themselves? In the event that this happens on a regular basis, you might have to request a Court order direction the party who is not paying, to make payment.
In all situations, it is always best if both parties can agree to make their portion of the mortgage payment to protect and preserve each other’s credit ratings.
What if one person cannot pay their share?
There are circumstances where one partner might not be able to pay their share of the mortgage. This often happens if one person is unemployed and taking care of the children of the marriage. In this instance, the Court can direct the income earner to pay the mortgage, in full or in a greater percentage, until the property issue can be settled.
What if neither of the parties can afford to continue to pay the mortgage either jointly or separately?
There are some instances where neither party, together or separately, can continue to afford the mortgage payments. In this instance, it is often advised that the couple put the house on the market as soon as possible. Once the home is sold, the profits can be placed in an interest-bearing account for distribution once the division of assets is agreed upon.
What if one party wants to keep the home and take over the mortgage?
This option is certainly permissible. However it is not likely that one person will be able to take over the existing mortgage. The party proposing to take over the mortgage will have to meet the requirements of mortgage qualification. This may include re-doing some of the paperwork and applications required for securing a mortgage in their name only. If this route is pursued, it is important to remember to remove the other party as a holder of the mortgage.
Even if one person wants to buy the other person out, but cannot qualify to do so, then the Court can compel the sale of the house. Again, any profits would be disseminated within the terms of the divorce agreement.
Sharing the Home
Sometimes for financial reasons, or for the best interest of the children, the separated couple might choose to remain living in the home while the divorce is in process. This is permissible as long as the couple agrees and the mortgage continues to be paid.
While any separating and divorcing can be difficult, it is important to openly discuss all of these options. These options can help to keep both parties safely sheltered and credit ratings protected. This will also allow both individuals and any children to remain stable and preserve their future financial status.
In the event that you find yourself in need of assistance, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.