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How To Deal With A Mortgage

If there is a mortgage on the home, you will need to take this into account when deciding what to do. If one of you stays in the home, will the mortgage be affordable and who will pay it? Is it possible to pay off the mortgage? Can the mortgage be transferred to just one of you or would remortgaging make sense?

Is the mortgage affordable?

If the property is mortgaged, you and your partner will need to think about how the monthly payments are going to be met whilst you are deciding what will happen to the property. There is no obligation on unmarried couples to support each other financially after separating, so it is important to find out who is responsible for the payment of the mortgage. You will also need to think about whether you or your partner can afford to stay in the property in the longer term or whether the property will have to be sold, either immediately or at some point in the future. Bear in mind that interest rates could go up, which could increase your mortgage payments significantly.

If the mortgage is in your name or joint names, you need to make sure that it continues to be paid as you are both liable for the full amount of the mortgage. This means that, if repayments are not kept up, the mortgage company could seek payment of the whole sum owed from you. Any late payment or non-payment could affect your credit rating which could make it difficult for you to get a mortgage, loan or other credit in the future - see Managing Money - Borrowing for more details.

If the mortgage is in your name, then you are solely responsible for the mortgage repayments and your partner is not obliged to contribute.

You may want to speak to your mortgage company at an early stage to explain that you are going through a separation. Sometimes mortgage companies will let you reduce the monthly repayments (for example by changing the mortgage from repayment to interest-only mortgage – see Jargon Buster) or take a payment holiday for a few months to give you some breathing space.

What happens to the mortgage?

When a property is transferred between former partners, and provided the mortgage company agrees, the mortgage is normally transferred into the name of the person who is keeping the property. Sometimes, the person who has given up their interest in the house will agree to act as guarantor, which means that they will be liable for some or all of the mortgage if the other person doesn't keep up the mortgage repayments.

Acting as guarantor can affect the amount that a mortgage company is willing to offer you to buy a home of your own in the future, so you should consider taking advice from an independent financial adviser before agreeing to act as a guarantor.

You may be able to make your mortgage more affordable by switching to a different mortgage on better terms (for example a lower interest rate). Consider getting help from a mortgage adviser see Useful Links. See – Managing Money - Borrowing for more details.

There is normally no tax to pay when you sell your only or main home but there may be in some circumstances, for example, if you have been running a business from home. If in doubt, check with a tax adviser - see Useful Links.

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