Divorce can be a difficult time for any couple. This can be made even harder when assets are involved, as it becomes a lot more complicated. Removing your partner’s name from the title and mortgage can be a tricky process but here we’ll show you how to do it.
The difference between the title and mortgage
It is imperative to know that these two are connected but not the same. Your name can be solely on the title deed of a property and vice versa. It can be easy to fall into the trap of getting your partner off the mortgage but forgetting about the title.
Removing your partner from the title can be relatively simple however you will still want to use a conveyancer or solicitor just in case there is any stamp duty to be paid. If you both agree to it and have the financials in place regarding the mortgage, then this shouldn’t be more complicated than filling out some forms, click here if you are living in QLD.
In case of a couple, the lenders generally care little about who is on the title of the property, they simply care about who is going to be paying for it. Due to this, trying to settle how the mortgage is going to be paid can be more complicated.
Changing loan and its terms can be difficult
As with any form of mortgage, the lender wants to have assurances that the loan is going to be repaid. When a couple has a home loan, the lender has double the security knowing that two people are liable for these payments.
When trying to remove your partner from the mortgage, you are asking the bank to give up that extra security. Due to that, the onus is on you to satisfy them that the mortgage is still going to be repaid with only one person being liable.
How to remove your partner’s name from the mortgage
There are a few ways to remove your partner’s name from the mortgage and here we look at them.
To refinance your home loan, you need to prove that you can afford it which will depend on your property equity, credit and income. It also depends on your ex-partner agreeing to give you the home which may need some compensation.
This will involve an assessment with the lender in a similar way to how you first obtained the mortgage. If the lender feels as though you’re not going to be able to afford the payments on your own then your application could well be declined. A way around this can be to replace your ex-partner on the mortgage with a new partner, parent or someone else.
If you do take this option then you may also have to “cash-out” your partner and pay them some percentage of any equity that they are entitled to. Working this out can sometimes be difficult as other factors can come into play such as who contributed most to the mortgage.
You may need to opt for a refinancing agreement which includes being able to pay-off your partner. It is recommended to engage a mortgage broker like Blutin Finance. Mortgage brokers usually have several lenders (some up to 30 lenders) to choose from. This should make your refinancing an easier process compare to you running around to find a suitable lender.
Take over the current loan
This is what most people hope to do when they separate from their partner. This is where you tell the lender that you intend to take sole responsibility for the full amount of the debt while keeping the terms of the mortgage the same.
As mentioned earlier, lenders love having that security of two people on the loan and therefore obtaining one of these can be difficult as for some it’s simply not their policy to release the liability of one person from the agreement.
There can often be a fee to pay to take over the loan which you also have to factor in. If your lender agrees to this then it’s usually the best solution.
Selling your home
The least complicated option can often be to simply sell the property. This way you can have a fresh start where you don’t have to worry about taking on a large mortgage commitment. The couple will often do this and then split what’s left after paying off the bank.
This isn’t going to be an option if there is no equity in the home. If you sell the home for less than the value of the mortgage then you end up owing your lender a huge amount of money without an asset to show for it.
Your decision to do this is going to be affected by several different factors such as the current market price, how quickly you think you can make a sale and the equity available. The attraction of a clean-cut is enough for many couples to consider this option.
Keeping the status quo
A final solution could well be not to remove anyone’s name from the title and mortgage. While this may seem like a crazy idea, it’s what some people will settle on when they’ve run out of other options and see no other way.
This solution can be worked out in several different ways, such as both parties equally paying the mortgage and then splitting it once sold. You can also work out the equity currently in the property and split that once it’s sold, with the person making the payments entitled to any increase of equity after they took on the full mortgage payments.
Why would you do this? Well, you may be left with no option. If your lender won’t allow you to take on the mortgage and the market isn’t great, then you can be stuck. It may be that you continue with an agreement until another solution can be worked out.
This is a riskier option as a lot of it can come down to trust between the couples to manage the liability. If you do have to take this option then it’s the best idea to secure a legally binding financial agreement.
You may be looking through these options and thinking that none of them is great, and it can be tough. It’s always a good idea to get expert legal advice and speak to a mortgage broker to guide you through making the right decision for your circumstances.