A new dilemma
Couples divorcing during this cost of living crisis face harder decisions about their mortgages and how to fund where they and their ex-partner will live, in challenging and uncertain times.
Couples whose assets are insufficient to fund the purchase or setting up of two separate homes may feel they have no alternative than to remain in the family home together until rates, hopefully, level out. But this can be challenging, particularly if there are abusive behaviours, and parents need to consider the impact of arguments and an unhappy home environment on their children.
Those who can afford two properties from the pot still find their options dramatically reduced, with mortgages less affordable and borrowing capacities squeezed. Houses considered 12 months ago are no longer an affordable option, especially if you factor in sky-high utilities and food costs.
I have supported a number of clients recently who had to accept the sale of the family home as part of the divorce, as they could no longer afford to maintain it.
And time is not on people’s side. As interest rates seem set to rise further, there is now an increased urgency to sort out any issues as quickly as possible, before mortgages go up again and offers can be withdrawn. I have one client whose fixed rate runs out next April, who cannot afford to move to a standard variable rate, so the clock is ticking for the divorce to process and the house to sell.
In other cases, I have noticed that the low-rate mortgage has become a focal point of dispute, as couples argue who gets to keep it — on the current property or a new one — as paying off a loan at 1.5 per cent will save thousands of pounds compared with the new one at 6 per cent or even 7 per cent.
What if a couple cannot agree?
For couples who cannot reach agreement, there are a number of options available, including negotiation through solicitors, mediation, collaborative law and arbitration. However, if these do not work, there is the option to apply to the family court to let a judge decide.
If the court has to make the decision, it will look at the individual needs of each party and any children, the available “pot” of combined financial resources, and apply a checklist of factors, such as the length of the marriage, the health of each party and the standard of living during the marriage, to decide what is the fairest division of the assets in each case.
