First things first: tell your lender about your situation ASAP. Most lenders will be sympathetic, and might even give you a payment holiday for a little while (a break from paying back your mortgage, though you’ll still have to pay the interest).
If you’re getting divorced, and you have both your names on the mortgage, there are three main things you can do:
1. Sell your home and split the money
You could sell your home, pay off the outstanding loan, and split what’s left between you. Then, you’re both free to put down a deposit on a new properties of your own, if that’s what you’ve agreed to do.
2. Continue paying the mortgage jointly
You’ll both be equally liable for the mortgage until it’s paid off in full, even if you’re not living together or at the the property itself. Let your lender know what’s happening, as they’ll want to confirm you can still afford your mortgage if you start paying more in bills.
Your credit will still be tied together, so if one of you stops paying, it could lower the other’s credit score. If one of you misses payments, and the other can’t afford to make it up, it could even put your home at risk.
3. One of you buys the other out (‘transfer of equity’)
With signed permission from the other person, you change the mortgage contract and deeds so they’re in just one name. It might be a good idea for both of you to get independent legal advice if you’re considering this option.
The person staying on the mortgage pays the other their rightful share of the equity in the home (ie the amount you own outright together). The price is based on the property value now, so if the value has gone up, you might need to borrow more money to pay them.
Now, you can both unlink your credit files, so your scores won’t be affected by the other’s activity. If you’re the one coming off the contract, you should now find it easier to buy a new home or borrow more money.
If you’re the one left on the mortgage, you won’t have to rely on anyone else to make payments on the property. But when you go solo, your lender will treat this as a new mortgage, so will give you another affordability and credit check. It might be a good time to remortgage, and make sure you’re on the best deal.
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