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Funding your divorce settlement: by remortgaging your home

When you are separating from your spouse or partner the main focus for you both may be how to deal with the family home which is likely to be your main asset. 

If you are married to each other than the family home will have to be discussed alongside any other assets that you both might have such as pensions, other properties, business interests etc.  You should therefore ensure that you do not focus solely upon the house but consider these as well, preferably with a Solicitor.

If you are not married to one another than all you will have to deal with is your respective interests in the family home.  You do not have a claim upon your partner’s other assets and vice versa when you are not married.

As a starting point for all cases, the home should be valued.  Usually, you would get two or three Estate Agents to the property so that you can agree an average figure with the other party.  Sometimes, if the value cannot be agreed then a more formal valuation will be required.

You also need to contact your mortgage company to find out how much you owe to them in total including any (early) redemption penalties.  If you have any other debts or charges secured against your home such as secured loans, you should also get figures for these as well to find out how much it would cost to pay them off.

Once you have that information you are then able to calculate what we call the “equity” which is essentially the value of the property less the mortgage and any other secured charges.  So, really what you might get if the home was sold.

If you are not married to one another then, likely, you will be looking to pay to the other party or receive from them one half of the equity.

As above, if you are married to one another this may be a starting point, but you will also have to consider any other assets as well.

The next step, if you can agree a figure is to speak to the mortgage company (if you have not done so already) to check that:-

  1. They will give you the existing mortgage in your own name.
  2. You can borrow the funds that you have agreed to pay the other party.

Sometimes people think that this is not going to be a problem and do not speak to their mortgage company until a late stage.  It is very important that you have a conversation with the mortgage company at the earliest possible point as sometimes it is not as easy as you may think to take on the mortgage on your own or to borrow additional funds.  Just because the mortgage was originally based on your salary or because you might have been making the payments does not mean that they will give it to you on your own.

If your existing mortgage lender cannot assist, then we suggest that you speak to an Independent Mortgage Advisor who can then look at other mortgage providers to see if they can help you in your situation.

It is important to remember that if you have missed any mortgage payments or have significant other debts, this may prevent you from being able to take on the mortgage or borrow further funds.  It might also be difficult if you have recently changed jobs or are self-employed.  These are all reasons why we recommend that you speak to your mortgage provider or indeed an independent mortgage provider at the earliest stage.

Sometimes people are able to borrow funds to pay off the other party from family or friends.  This is fine, but you still need to check that the mortgage company will give you the mortgage in your own name.  The Solicitor dealing with the property transfer will also need evidence of where those funds are coming from such as your family members’ bank statements and will also require their full identification documents.

Once you have everything in place i.e. an agreement with the other party and the agreement of the lender, you will need to instruct a Conveyancing (land law) Solicitor to assist you with the process of the property transfer and re-mortgage This will ensure that you own the house in your sole name once you have paid the agreed amount to the other party.

It is very important that you speak to a Family Lawyer prior to this time to see if you need to draw up some sort of Separation Agreement or obtain a divorce in order that what you have agreed with the other party can form part of a “clean break” to ensure you do not have to pay them anything else.  We would recommend having this discussion at an early stage so that you do not have to rush to sort out any such paperwork immediately prior to the property transfer.

Our friendly Family Law team can assist you at any stage of this process with a fixed fee divorce or separation consultation for only £150+VAT.

And our Residential Property Law team can assist you with the remortgage conveyancing process, try our instant online calculator to find out how much it will cost.

Speak to a member of our team today on 01623468468 or use the enquiry form below.

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