Working out what happens to your home when you get divorced can feel like a bit of a minefield. Here’s our guide to dividing this asset.
Breaking up is never easy, and it’s accompanied by a lot of stress and emotional upheaval.
As if coping with all that wasn’t enough, you also need to deal with the financial fallout.
Divorce settlements involve dividing assets as fairly as possible, but this is rarely a simple process.
One of the biggest decisions you need to make is how to divide the family home. For many couples, this is their biggest asset – and the most significant part of negotiations.
What happens to an existing home – and where one or both partners will go next – will depend on the divorcing couple.
What are the options?
- Sell the property and split the proceeds
Selling the property and dividing the proceeds may be the preferred option if you don’t have children and want a clean break.
This is often the simplest option, and gives both of you a fresh start both emotionally and financially, as you both move out.
On the downside, if there are children involved, this means uprooting them.
In addition, in a slow market, selling a property can be difficult. This means you either have to hold on to a home you no longer want together – or lower your asking price to get a faster sale.
Agreeing on how much you can accept for the property can be tricky if you’ve parted on bad terms. Neither of you will want to accept a low offer if you are trying to use the proceeds to buy a new home.
You also need to check if there are any redemption penalties with your current mortgage – and factor these into your budget, alongside any legal and estate agency fees. You need to go into this arrangement with your eyes open to avoid any expensive surprises.
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- Arrange for one partner to buy out the other
A second option involves one of you buying out the other and keeping the property.
This may be a good option if children are involved, as it means you can minimise disruption as much as possible.
On the downside, this can be expensive – and may be unaffordable.
If you do go down this route, you need to transfer the mortgage which can be complicated. You may also have to try and find enough assets to even out the value in the divorce.
Further, whichever one of you keeps the property will have to work out whether they can afford the monthly costs alone.
- Keep the property and not change who owns it
With this arrangement, one of you continues to live in the property. You may do this until, say, the children are 18, or leave school.
While this minimises upheaval for children, on the downside, both you and your ex remain on the mortgage. This can make it harder for the partner who has moved out to get another mortgage to buy another place.
- Seek a Mesher order
A further option in England and Wales is a so-called Mesher order. This is where the departing spouse, usually the husband, keeps an interest in the family home until the children reach 18. The house sale is deferred until this time, and the net sale proceeds are then divided in accordance with the court order.
While this may make sense at the time, the partner who stays in the house (often the wife), can then end up trying to get a mortgage in later life – often in her 50s – which can be very difficult.
Valuing the property
No matter which option you choose, the property will need to be valued for the settlement.
If you and your partner can’t agree upon a value, the court will order a report from a local estate agent or surveyor. That individual has a duty to the court to report accurately with an independent and unbiased valuation.
The valuation should be a market valuation – in other words, what the property would sell for – rather than a suggested asking price.
What if there are children?
In the eyes of the court, legal ownership of a property is not the deciding factor when dividing assets – and particularly when children are involved.
If you have children – and especially if they are young – the court will take into account the fact they need somewhere suitable to live with each parent.
The decision a court makes will vary, depending on your own circumstances.
What if the property is only in one name?
Even if a house is only in one of your names, if it is the marital home, your partner has a legal right of occupation for as long as you remain married to each other.
Equally, if you are married, all assets are known as the marital assets and divisible equally between you, regardless of how they are owned.
This means that both of you will usually receive at least some share of the equity – even if the house is only in one name.
What if you’re co-habiting?
By contrast, if you’re cohabiting as ‘common law’ husband and wife, the rights in law around property are different.
Unless your name is on the mortgage or deeds, you may not have any rights to the property, no matter how much you’ve contributed to the bills over the course of the relationship.
This could be an issue if you have moved into your partner’s home during the relationship, and made payments towards the bills and mortgage.
If, then, you go your separate ways, you could find you have no rights to stay – and no rights to any capital – as your name is not on the deeds.
It’s worth noting though, that if you’re not married, but have children together, the law is slightly different – so it’s worth seeking legal advice on your rights, and those of your partner.
Taking the next step post-divorce can be difficult, as you may struggle to raise a large enough mortgage on your income alone.
You may need a lender willing to take maintenance payments into account.
With this in mind, you might want to seek out the services of a broker.
The other option involves you renting for a time while you get yourself back on your feet financially.
- As a couple going their separate ways, it’s important to seek legal and financial advice, so you understand the options available to you.
- If you are selling your home, try to avoid telling potential buyers that you are selling due to divorce. This can put some buyers off because if both you and your partner are trying to find new homes, the chain essentially doubles. In addition, if potential buyers know you are separating, they will assume you are keen to move out, and may put in a lower offer, knowing you might just accept.
- Give some thought to how you are going to split all the costs associated with selling your home.
- While dealing with the family home – and any other properties – during a divorce, try to remain detached, amicable and straightforward.
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