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The impact of divorce on mortgages and property ownership

Owning property brings with it added stress and complexities when going through a divorce. Mortgages and property ownership will be brought into question, and while some divorce cases will see these issues resolved with a degree of straightforwardness, many can lead to disputes.

As is natural in a relationship, many things owned by both parties will become tangled up over time, and this is true of property and mortgages.

When divorce proceedings occur, untangling these responsibilities is crucial for both individuals to settle the issue and move on with their lives.

Joint mortgages during divorce

When a couple takes out a joint mortgage, both parties are equally liable for the mortgage payments.

This responsibility persists even after divorce until the mortgage is fully paid, the property is sold, or the mortgage is transferred to one party.

If mortgage payments are not met, it can adversely affect the credit scores of both individuals, regardless of who has vacated the property. Therefore, a clear agreement on mortgage payments during the separation process is vital.

Property division and tax implications

In a divorce, the division of property is typically determined by the court, taking into account various factors such as the length of the marriage, each party’s financial situation, and each party’s contribution to the property.

If one party wishes to retain the property and buy out the other’s share, they can refinance the mortgage to release funds to pay the other party.

However, they must demonstrate that they can afford the mortgage on their own.

Capital Gains Tax (CGT) rules have changed and disposals (sales or transfers) of property upon divorce may give rise to a CGT liability. Specialist financial advice should be sought.

Selling the property after divorce

Another common approach is to sell the property and divide the proceeds. This can provide a clean break and allow both parties to move forward.

However, if the property is in negative equity, both parties remain responsible for repaying the remaining mortgage balance.

The impact of divorce on mortgages and property ownership can be substantial for the parties involved.

The best solution will depend on the individual circumstances of both parties. Open communication and cooperation can help make the process smoother and lead to a fair resolution.

If you would like more advice on properties and mortgages after a divorce, please contact our Family Law experts.

Stuart Daniel

Head of Family Department

I qualified as a Solicitor in 2006 and now specialise in divorce, financial settlements, childcare arrangements and Pre Nuptial Agreements. I have many years’ experience as a private family lawyer having worked with two other local firms before returning to Mander Hadley, where I first undertook work experience during my university studies.