MOVING
DUE TO SEPARATION OR DIVORCE
myonlineestateagent.com
Moving Due to Separation or Divorce
INTRODUCTION If you are fortunate to have no children then the process of undergoing a separation or divorce could prove to be a lot easier in purely logistical and legal terms, despite the emotional trauma you may have to endure. Many married couples have invested time and money together over their relationship and finding the right balance can take a great deal of soul searching and negotiation by both parties when it comes to dividing up the assets. Nowhere is this more important than when you have bought a property together. The legal ramifications can be daunting and if the split is acrimonious then the subject of who gets what can prove very traumatic and take a long while to sort out. When couples and individuals separate after buying a property together there are a number of options that can be considered including one party agreeing to sell the home to the otheror one deciding to take on the full mortgage or meet the realised property value. Obviously, a lot depends on how long you have been married and where you are in the repayments on the property. For example, if you have been married for 30 years and paid off your mortgage one party is more likely to want to stay in the home for sentimental reasons and the solution, if both contributed equally, would be for one partner to pay the other their share. If you have only recently moved into a property and have a joint mortgage then there are a couple of ways to go including selling off the property, paying off the outstanding debt and going your separate ways. But what if both parties don’t agree or what happens if the property is currently in negative equity?
2
www. myonlineestateagent.com
Moving Due to Separation or Divorce
THE MOVE Head over heart It’s an easy thing to say when it comes to matters of the heart. Divorces can be a simple case of two people realising that they are not actually suited. Unfortunately, they can also be painful and damaging experiences that take a long while to get over. When it comes to settling what belongs to whom, it helps to use your head more than your heart.
What is the matrimonial home? When you get married and buy a place together this becomes the matrimonial home, irrespective of who pays the mortgage and who has the name on the title deeds. For most couples, the house they live in is their single most valuable asset. How this and other assets arefinally divided is going to depend on a number of factors including how long the parties have been married, whether there are any children, who has contributed what and perhaps even contributions to future assets such as pensions and investments. Other areas to be taken into account include the length of the marriage and the age of the parties, as well as the physical or mental health of those involved. You can find a full list in the Marital Causes Act of 1973, section 25 (2).
Splitting the property When it comes to divorce or separation, there is no set formula for working out the amount that goes to one party or another though you will probably begin with a 50:50 split and work your way on from there. A lot will depend on what other assets are available. One party may allow the other to stay in the property in exchange for other assets such as investments or additional property. One thing that will need to be decided is the proper value the marital home. Both parties may well get their own valuations and if these disagree vastly then the court will have the right to order a joint report that arrives at a price for the property. No one expects to go through a divorce and it can create a great strain on health and well-being for both concerned. It is essential that you take the right legal advice immediately particularly if the property is only in one of the party’s names. If this is the case then it is vital to take out a Notice of Home Rights which can be lodged with the Land Registry and ensures your spouse cannot sell the property without your consent.
www. myonlineestateagent.com
3
Moving Due to Separation or Divorce
Both parties agreeing to sell the property 42% of marriages end in divorce or separation and this often leads to the property going onto the market. Many couples nowadays have an equal input into the mortgage as both work and when they come to separate want to make sure that they can transfer their assets over onto the next phase of their lives. When you came to buy your property you will have had a couple of choices for the arrangement. 00 To enter as joint tenants where both of you own the property equally. 00 To become tenants in common where the percentage of the property owned by one individual might exceed the amount owned by the other. It is important to make every effort to find out which arrangement you have when you are subject to divorce proceedings. Again you can do this through the Land Registry for a small fee (note, there are slight differences where you are in Scotland or Ireland). If you are joint tenants then if one party dies the whole estate moves across to the other party. That’s why, following a divorce, the two parties often switch to becoming tenants in common. If both parties agree to sell the property then certain problems arise such as getting a fair price for the sale and how any profit is then split between the couple. The housing market may have taken a slump and both parties could well be in negative equity as far as the value of the property is concerned. That could mean renting out the house or flat for a while as a short term solution until property prices recover. Obviously, getting the best deal depends on the divorcing or separating couple willing to reach an equitable agreement. Whilst some parties manage this easily, others can find it a huge stumbling block at which point the courts need to make an intervention. Both parties may be looking to move on and get a place of their own which can prove difficult if you are still managing the mortgage for your existing home.
One party buying the other out Dependent on the options, you could find that one party in the divorce has the ability to buy out the other and stay in the family home. Again this involves reaching an equitable agreement and can cost an awful lot in legal bills if the parties are unable to find common ground. The problem here is that it is normally the partner on the lower income who suffers when it comes to a buy out if they want to stay in the family home – mainly because they simply can’t afford the additional mortgage that is involved. If this is the case then it’s time to utilise the services of a good solicitor. Even if both parties have contributed the same amount in mortgage payments, one might have claim to a greater share if they have, for example, spent more on 4
www. myonlineestateagent.com
Moving Due to Separation or Divorce
home improvements such as installing a new kitchen. To transfer the mortgage you need the lenders consent and they will have to be sure that payments will continue after the divorce. It can be a long and arduous process for couples trying to sort out their finances if they go entirely through the courts. It is perhaps much better to go through a professional mediator who can help bring agreement without having to resort too much to solicitors and judges. Whilst you may wish to stay in the marital home, matters could well be taken out of your hands if the lenders do not feel you have the resources to cope with the mortgage.
Getting a court order If you want to sell the house and your ex-partner does not, then you may well reach an impasse that can only be solved by the law. In this case you will need to apply to the court and begin the laborious process of trying to get an order for the property to be sold. This is usually a last resort because it can often leave both parties out of pocket and not entirely satisfied with the outcome.
Acrimonious Endings As we may have mentioned, not all divorces end in agreement and one party may well feel more damaged than the other. This can also lead to aggression and even violence at which point the court can put in place certain restrictions such as an occupation order or a non-molestation order where one party will have to vacate the home and maintain their distance. These orders are generally used when there is a real threat of domestic violence.
Negative Equity One problem that many home owners have had in recent years is with negative equity – where the price they paid for their property has fallen. If you are going through a divorce then this can cause significant problems if the sale value of the house does not cover the mortgage. More than any other situation this requires both parties to use a fair deal of common sense and show patience. It is also a good idea to contact your mortgage provider to find out what other options are on the table.
www. myonlineestateagent.com
5
Moving Due to Separation or Divorce
MOVING ON
Advice on buying property following a divorce Assuming that you have reached agreement and the financial details have been finally settled, you may want to move on and that includes getting a new property to live in. This can, according to some, be a significant part of the healing process especially if you have been in a long term relationship and have not had to live alone for a considerable while. 00 First of all, you don’t need to rush out and buy a new property but can rent one out to begin with. This can often be the best move in the short term as it allows you time to think and plan for your new future. 00 You need to decide if you are going to stay in the area or move on. If you have friends and family in the area you will no doubt want to remain local or you might decide that it’s time to have complete break with your past. 00 You need to find a property that is within your means and easy to manage. You can check out property websites and find out which are the best places to live at a price you can afford. 00 How easy is it to maintain? Buying a cute little cottage in the middle of nowhere might seem like an ideal but you may well have to work hard to maintain it. The same can be said of flats where you might have to sign a maintenance agreement that could cost you money in the long term. 00 Do you want a garden of your own or shared amenities? Having your own space is important but if you want your own garden then you might like to look at a house or bungalow. Flats often come with shared amenities. According to The Telegraph this is actually the time to use both your head and your heart in equal measure. If you are starting with a new home and a new mortgage then you need to find the best price but you also want to choose the right place where you feel comfortable and safe, able to start your life over and begin again. You may have been lucky enough to come away with a sizeable financial settlement but that doesn’t mean you need to rush into buying your next place. Take advice from friends and family about where you are going to live next. Failing that, it helps to get a third party professional who can get you to step back every so often and make the right financial decisions.
6
www. myonlineestateagent.com
Moving Due to Separation or Divorce
Getting a new mortgage Now that you have stepped out into the market again, looking for a house requires you to choose the right mortgage as well as the property that you want. The best deals are achieved by those who have more to put down as a deposit and you will need to decide a) how much you can realistically afford to borrow and pay back reasonably easily and b) what percentage of your divorce settlement you want to put towards your new home. As with most things, the cheapest mortgage is not necessarily the best for your needs or your future. There are advantages and disadvantages for each type of mortgage and careful consideration is needed before you finally sign on the dotted line: Fixed Rate Mortgages: The interest rate is kept the same for a period of 1 to 5 years and you can budget more confidently. The problem is that if interest rates fall you will not be able to take advantage of them during the time of the deal. Tracker Mortgages: These are linked to the base rate of the Bank of England which at the moment is pretty low. The big advantage is that they normally offer better rates than fixed rate mortgages. The disadvantage is that you don’t have control over how and when interest rates rise or fall. Discount Mortgages: The mortgage is linked to the lender’s own rate and not the Bank of England’s and the rates are generally lower than fixed rate ones. Some would say there is a lack of transparency concerning these kinds of mortgages and it is best to make sure you can handle repayments should the rate suddenly go up. Offset Mortgages: These use your savings to offset payments on your mortgage and can lead to you paying off your mortgage much quicker than with other methods. The problem is that if you get into financial trouble it can make payments difficult to handle. As with choosing the right property, it pays to visit different mortgage providers and find out what they offer. This is definitely the time to use your head more than your heart. Find out more about mortgages here.
www. myonlineestateagent.com
7
Moving Due to Separation or Divorce
Letting out your property You may of course want to ride the market until the value of your property has grown enough to put you back in positive equity. This might apply if you have received the house in settlement or have reached an agreement with your ex-partner to find an alternative solution to selling. You may want to stay in the property until the market slump changes or you might just want to move out, start afresh and let your old home to a third party. Letting can provide an additional income for the property rather than leaving it empty. Of course, if you want something to occupy your time then you can take on the responsibilities yourself, including finding tenants, vetting them, providing maintenance and checking up on your new renters. Hiring a letting agent on the other hand can prevent you having to handle all the landlord duties yourself and give you time and more finances to find a place of your own. It all depends on your circumstances and the kind of settlement you reached when the divorce came through. Letting can also provide a stop gap if both partners have moved out and you want to make sure the mortgage payments are covered. There are a number of things you need to consider before opting tolet out your old matrimonial home: What type of mortgage do you have? First of all, whether you can let out your property will depend on your lender – the type of mortgage you have may contain stipulations that you cannot rent out the house or flat and this will need to be changed if you are moving towards being a landlord. It might even involve you taking out a totally different kind of mortgage. Does your home need work? People will expect a certain level of comfort from the home they are going to rent and that might mean you have to spend some money on renovations. This could include painting and decorating, getting in new carpets or even updating the heating system. If this is a joint effort on behalf of yourself and your ex-partner then you will have to agree the finances for the changes. Is it in the right area? If your property is okay to rent out then it is time to have a look at the area you live in and whether it is ideally suited to the rental market. A quick check with online platforms such as Zoopla or RightMove will show you what the market is like in your area and, more importantly, the amount landlords are charging. How to choose the right letting agent. You may want to do it all yourself but most people tend to go through a letting agent who will find the right tenants and manage the property for you, for a fee of course. There are a number of letting agents around and finding the right one takes time and a little patience. It pays to do your research and make every effort to settle on the best partner for your new career as a landlord.
8
www. myonlineestateagent.com
Moving Due to Separation or Divorce
Setting the term. You are going to decide how long you want to rent your property out for and this can be problematical particularly if you are going to use it as a stop gap whilst the market improves. It’s important to make sure that all parties agree before that extra layer of legality is brought on when the tenants sign their contract.
Important decisions Whether you are at the beginning of a separation or nearing the end, there are always important decisions to make about your property. Finding the right mediation is key to a reasonably happy ending and separating heart from head generally helps make the best decisions. Our advice is to make sure that you are well aware of your rights and to employ a competent solicitor even if the separation is amicable. The chances are you may well have to become an expert in property law before the divorce is over and there are plenty of resources available to help make sure you stay ahead of the game.
www. myonlineestateagent.com
9
www.myonlineestateagent.com