Separating from your partner is not only a challenging time emotionally, but financially. The process of building a life together naturally follows getting married or entering into a civil partnership. This may involve purchasing property, raising children and perhaps even altering your career path. The act of building the family home is a significant commitment and as a result, divorce or dissolution is - more often than not - a period of great uncertainty.
Dividing the home
The challenge most separating couples face is the division of the family home itself. After all, it’s the space you inhabit together every day; so naturally its value will be sentimental as well as practical. Reaching an agreement on the critical decisions surrounding property can be difficult, and for many couples, it’s something that was never raised and discussed until the break up. If you and your partner own property together, there are several options you have.
These options depend on how you own the property: as joint tenants or tenants in common. As joint tenants, both you and your partner will legally own the property together with no distinction between shares. As tenants in common, both partners will own separate shares in the property (usually 50% each, unless you have reason for one party to own a larger share.) Ultimately, however, the decision will remain the same. You could choose to:
- Agree on selling the property and move out, using the money to both buy or rent a new home.
- Agree to one partner buying the other out.
- Keep the property. This could be a temporary solution if you have children, for example.
- Agree to having one partner transfer an amount of the property’s value to the other as part of a financial settlement. They would keep a stake in the property; meaning a certain percentage of its value would be transferred upon sale.
- Agree to selling the property with a 50-50 split; but having a ‘mesher’ order put in place. This means the sale of the family home will only be legally possible after a certain event, e.g. your child turning 18.
Dividing the mortgage
If you decide that one of you is going to remain in the property and buy the other out, the next step is considering the mortgage. Upon divorce or dissolution, it’s common for couples to cut the financial ties that link them together such as mortgages. This is done by one person’s name being legally taken off the mortgage. This comes with many advantages: for a start, the person remaining in the family home does not have to rely on their ex-partner to make mortgage repayments. Secondly, the person leaving the family home is likely to get a better mortgage offer than they would were they still tied to their old mortgage. Cutting ties financially - also known as getting a ‘clean break’ divorce - allows you to be completely financially independent once more, as you are not linked through debt and therefore your ability to manage debts will not affect your partners credit rating.
However, having the mortgage in one name only will depend on the financial circumstances of the person keeping the property. Before you are able to have the mortgage solely in your name, you will have to be financially assessed to check you are able to make repayments.
Mortgage lenders base the amount they will lend to you on a loan-to-income ratio. Generally, the amount you will be able to borrow will be up to four times your annual salary. Your mortgage advisor will assess all your incomings and outgoings to decide whether you will be able to keep the mortgage in your name only. If it’s not possible, you may be able to get a guarantor mortgage. This arrangement involves a person close to you (i.e. a parent or new partner) legally agreeing to make payments on your behalf if you are unable to. This will depend on individual circumstances, and is a serious commitment for the other party involved.
Dividing your assets
As well as the home itself, it’s likely that you both share interests in matrimonial assets. Cars, savings, even significant items of furniture and electronics that may have been purchased together will count as matrimonial assets. Reaching an agreement about how these are split and agreeing on a financial settlement can be done through mediation; which involves a trained mediator guiding you and your partner through discussions and actively promoting solutions that meet your individual requirements. If you and your partner can make a decision through mediation, this can be transformed into a court order at the same time as granting the decree nisi.
Where an agreement can’t be reached through mediation, it will fall to the court to divide your assets as the judge sees fit. This will be based on how long you have been married, your ages, your abilities to earn, whether you earned more than your partner and your individual needs.
From the moment you and your partner decide you want to divorce, it’s a good idea to speak to a specialist divorce solicitor. The choice to separate is undoubtedly life-changing, so having a helping hand during this time will only help in getting the divorce over and done with while ensuring your rights are respected and your interests protected.
At Crisp & Co, our practice is dedicated to family law. With a wealth of experience, our team of solicitors understand the challenges couples face when dividing the family home. Making financial arrangements can be particularly challenging for separating couples, and this is where you will benefit from the expertise of our solicitors. We’re always at hand to provide advice, guidance and representation when you need it the most. Get in touch today on 0203 857 9885.