Divorce is one of the most stressful situations that people go through in their lives, due to a huge level of both emotional and financial strain.
At KB Mortgage Services, we’re not family lawyers, but we do have a small part to play in helping people to stay in their family homes.
Whilst some will decide to sell the house and split the proceeds, and others will decide to keep the property temporarily, the vast majority of cases will see one party keep the home and refinance it in order to pay their ex-partner out.
This removes the ex-partner from the party so it is no longer a joint asset, whilst freeing up cash to buy the ex-partner’s share of the equity. The other person’s name will be removed from the mortgage and the title deed. More often than not, this will be achieved by remortgaging and a ‘transfer of equity’. The party who remains in the house is likely to need to borrow more money, and qualify for a new mortgage based on their sole income.
That can be difficult if the couple originally qualified for the mortgage based on two incomes.
It is important to figure out the exact share of equity in order to calculate how much extra cash is required.
This involves four steps:
- Get the house valued
- Ask your lender for a redemption certificate to determine how much is left to pay on the mortgage – and ask about early repayment charges
- Subtract the mortgage figure from the house valuation
- Divide the result by the property owners
If there is a financial settlement within the divorce, this may also determine how the house is split and the final share of equity.
Once you understand how much more money you need to borrow, you can ask your current lender for a further advance, and they will carry out affordability checks to ensure you can repay the monthly mortgage on your own.
An alternative option is remortgaging entirely, or even taking out a second charge with a different lender. The same affordability checks would apply.
In complicated circumstances like divorce, good mortgage brokers can be worth their weight in gold, and make the difference between you keeping your family home or not. At KB Mortgage Services, we can help find you the best deal and save you money over the term of your mortgage.
How KB Mortgage Services can help:
- Reviewing your current buy to let mortgages with remortgaging
- Mortgage protection insurance
Note: Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment to your existing lender if you remortgage. Second charge mortgages are arranged by introduction only.
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