Divorce or separation is an incredibly stressful time. Made even more so by having to split the family home or buy out your partner. Deciding who gets what often leads to acrimony and upset, making things messy and complicated. Whether you decide to buy out your partner or sell the family home and split the profits, it’s vital you’re absolutely clear on how each of these options could impact you financially.
Refinancing to buy out your partner
Sometimes it makes sense to keep the family home, by buying out your partner’s share of the mortgage. In Australia, if both you and your partner are listed on the mortgage agreement, you can’t simply take over the mortgage. You will need to refinance the mortgage in your name only.
As with any loan application, refinancing your mortgage after a divorce or separation means proving that you qualify for finance and that you meet lender’s lending requirements, like:
- Proof of steady employment and an income that is sufficient to repay the loan.
- A good credit and repayment history.
It’s a good idea to do a credit check before you apply for any new finance, to make sure that you haven’t missed any repayments or had any defaults lodged against any joint accounts you hold with your ex-partner.
And if you are considering refinancing after a divorce or separation, it pays to talk to a Loan Specialist like myself – who can help you plan ahead and guide you through the refinancing process.
Selling and dividing the profits
In some instances, both parties choose not to stay in the family home and instead move out. In this case, the easiest approach is to sell the property and then divide the profits once the mortgage and any fees are paid out. This way, both partners have a chance to start afresh using their share of the profits to finance a new home.
If you do choose to go down this route, it’s best to seek legal advice as it can be tricky agreeing on sale price and the split of profits in a divorce or separation situation. But, if you are both listed on the mortgage agreement as the owners of the property, then both parties need to agree before any decisions can be made.
Divorces are hard on you, not just emotionally but financially too. Financial hardship in a divorce can lead to missed mortgage repayments which could impact your future borrowing power.
If you are going through a divorce or separation, it’s important you do all you can to reduce the financial impact and any loss, and ensure you are in the best position to start again. Get financial advice from a mortgage broker office who can help you plan out your future finances and get you back into your own home again.