Divorce law and mortgages

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 07. April 2022

Looking to speak to mortgage brokers about the changes to divorce law and whether it has any ramifications for mortgage market. 

The change has end for couples separating to blame one party to secure a quick divorce. Previously, if a couple wanted a swift divorce then one had to accuse their partner of desertion, adultery or unreasonable behaviour. 

  1. Will the launch of a ‘no-fault’ divorce impact the mortgage market? If so, how? 
  2. Has there been an increase in divorce-related mortgage enquiries? Why is that and is it a long-term trend?
  3. What are the challenges around divorce and mortgages currently?
  4. What advice would you give to clients going through a divorce?

2 responses from the Newspage community

There is no real reason why the advent of the "no fault" divorce would impact the mortgage market; the issues around the property and mortgage really remain unchanged and essentially boil down to can one party afford (by the lenders definition) to raise sufficient money to buy the other party out? In a lot of cases the answer is simply "no" which leaves many divorced couples still financially connected by a joint mortgage debt. Whilst they may not be arguing about who's fault the marriage breakdown was, they may yet be arguing about the money; especially if one wants to sell the property and other refuses.
Often, the issues we see the most where divorce is taking place is when it comes to one party wanting to be removed from a mortgage or title deed. If there isn't sufficient income for only one party to take over the loan, this often causes problems. Mortgage lenders issue loans on the basis of potentially two incomes, and there's a massive misconception that you can simply decide to 'come off the mortgage' without hesitation, which is so far from the truth. A mortgage lender has rules to abide by. For example, they can't be forced to extricate one party for a divorce if the other doesn't fit their affordability criteria. This then can lead to nasty court battles as one party may want to force a sale while the other does not, and if there are children involved, it's a whole other can of worms. For example, it could be that mum is legally entitled to stay on the property with the children until they're 18. However, if dad can't get himself off the mortgage, the full mortgage balance and payment, even though it's split between two, must be factored in if he wants to buy another property. This then raises the issue that if dad does have the income to buy a new home, they'll automtialcally have to pay the additional stamp duty land tax on top of having to factor in that background mortgage.