WHAT YOU NEED TO KNOW ABOUT YOUR PROPERTY AND MORTGAGE WHEN YOU DIVORCE.
Understanding what you should do with your house can be incredibly difficult. Often your home has strong emotional ties – while the big future vision has gone, holding on to the home offers some stability during a time of great uncertainty. Here are some things to consider upon separation. Rachael Scharrer, Divorce and Relationship Counsellor and Separation Strategist, answers the most common questions that separating individuals have about their property and their mortgage.
Do you have to sell right away? Upon separation, you do not have to sell immediately. Depending on your situation you may be living together under one roof or have made an agreement regarding the mortgage and property in the short- to mid-term.
Can you make it work by holding the property and selling at a later date? Depending on the agreement and amiability between you and your ex-spouse, you may find that it isn’t in your best interest to sell your property in the current property market. Some couples agree that one individual can live in the property for a specified time or they agree to rent it out for a year or two. In this instance, a binding financial agreement (or financial agreement) would be appropriate to ensure that each individual understands their financial obligations and responsibility surrounding the property.
Can you both own it but only one person live in it? Yes, you can both own the property and one person live in it. However, in many separations, having a property together means that there are still ties to each other. For some people and relationships, this isn’t a healthy option, especially when there is coercion and control issues. For other couples, they may decide to have a Binding Financial Agreement (otherwise known as a Financial Agreement) or Court Orders which stipulate the intentions and future division/ownership of the property by one or both of the individuals.
Can the mortgage be taken over by one party? It is possible for one person to take over the mortgage. However, you will need to consult the Bank or your mortgagor and ensure that you are able to secure the amount of funds that you require for the mortgage (and any other funds that you may need to buy out your ex-spouse). Often when one person takes over the mortgage, there is also a Court Order for the transfer of the title or a Court Order nominating the financial responsibility to one individual.
Can I change the title of the property from joint ownership to sole ownership? Upon reaching a financial settlement and creating an Order with the Family Court, you will be able to transfer the title into one name without having to pay additional Stamp Duty. Without the Court Order specifically nominating the title transfer, you may be obliged to pay the Stamp Duty for the title transfer.
What happens if it sells for less than the value of the mortgage? If you sell your property for less than the value of the mortgage, then the remaining debt is shared between the two individuals, unless expressly stated in the court orders. The debt to the Mortgagor or Bank is still required to be paid back. In your financial settlement, there may be other assets that could be liquidated or cash available that can pay off the residual mortgage. Alternatively, if you have another property or loan, the debt may be able to be rolled into it – this will need to have the approval of the lenders.
Who repays any mortgage debt? If both individuals are named on the mortgage, then each person is equally liable for the debt, unless there have been orders made assigning financial responsibility of the mortgage payments.
What happens if the mortgage isn’t paid? When the mortgage is not paid, the consequences can range from a poor credit rating for you and your ex-spouse to the Mortgagor foreclosing. If you are concerned about your mortgage, it is ideal to talk to your bank or mortgage lender to advise them of your situation and keep them informed with the steps that you are taking.
What is intentional debt? Intentional debt often happens in separation when neither person named on the mortgage want to pay the repayments or any costs towards the business. Unfortunately, this is a rather common occurrence. It is unlikely that a financial advisor or lawyer has recommended either person to refrain for contributing towards the mortgage because the implication of not paying the mortgage have long-lasting effects.
Will I be credited for the money that I put in towards the mortgage (when my ex-spouse isn’t paying anything)? You are welcome to make a claim on the mortgage payments that you have made towards the property. However, for many couples, the mortgage payments made during separation are not added to the balance sheet of the financial settlement. You may want your mortgage repayments (especially when you aren’t living in the property) included as an add-back into the financial settlement.
In summary: The faster that you and your ex-spouse can reach a financial agreement and create it into a Court Order the more likely that you are to have a ‘more true’ snapshot of your financial position while you were together. Equally, the faster that you reach your financial settlement, the more certainty you will have regarding your property and your financial responsibility.