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Who pays the mortgage after separation?
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A mortgage loan is usually the most significant expense for a family. It’s essential to work out who’s going to pay the mortgage and understand who is legally responsible for paying it.
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After separation, finances can be stretched to the limit, especially if there are two households to run.
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Whose name is the property in?
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If your property is in joint names, it’s likely you and your ex will both be listed on the mortgage documents. This means you are both legally responsible for the repayments.
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What happens if the repayments aren’t made?
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If the mortgage isn’t paid, sooner or later the bank will take possession and sell your property to discharge the debt.
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This could result in a ‘fire sale’, and you might get a lot less for your property.
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A default in mortgage loan repayments can affect your credit rating and your ability to borrow money in the future.
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If you have a poor credit rating, you might find difficult to buy a property one day or even obtain a credit card.
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If you stay in the home and your spouse moves out...
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It’s generally considered your responsibility to pay the mortgage and expenses for the house if you’re the one living there.
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If you’re in the home but can’t afford the mortgage, you need to sort things out quickly, so you don’t default on the mortgage loan.
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Perhaps your ex can afford to assist with the mortgage repayments until an overall agreement is reached? In some cases you might entitled to financial assistance from your ex, known as 'spousal maintenance'. They might be required to pay the mortgage loan until financial matters are agreed upon.
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If your ex has moved out, they will have their own living expenses, rent and possibly child support to pay.
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They might not be able to afford any contributions towards the mortgage.
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If you both agree the house will be sold, you should do it before the bank takes action against you.
You’ll be much better off selling on your own terms.
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If you moved out and your ex stays in the home...
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Although it’s generally expected they should pay the mortgage and expenses for the home, they might not actually make the payments.
You should stay in touch with the bank and double-check the payments are being made and also ensure the property is appropriately insured.
If your name is on the mortgage loan, you are legally responsible for repayments, regardless of whether you’re living there or not.
A default in repayments can affect your credit rating so it's really important to keep an eye on things.
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Stay in contact with your bank/lender
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Contact your bank (or other lending institution) and let them know what’s happening. They may have some options for you.
Arrangements can sometimes be made with the bank to reduce the repayments (perhaps to interest only payments) for a period of time.
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If your home is being sold, they might even agree to suspend payments for a short time.
You might discover you’ve been making additional payments above the required loan amount and can reduce your monthly repayments.
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What next?
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It's perfectly normal to feel stressed and overwhelmed after separation. Sometimes you just need to make a start. Make a to do list and if you’re feel you might need some guidance but you're unsure where to start, we’re here to help.
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Have a look at our Separation Guide which will take you through things step by step. It will give you some peace of mind and is a reference you can go back to over and over again.
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