Divorcing – what to do with our mortgage?
Divorce is an unfortunate common problem for many people in Adelaide, and the untangling of houses, loans and other assets through the separation period can seem like a daunting task. When it comes to the marital home or any other properties owned, there is three main options when it comes to divorce:
- Continue to both hold the property jointly
- One party buys out the other party
- Sell the property
The second option generally is the most common – with one partner buying out the other. Selling is seen in many cases as undesirable, due to the costs of real estate agents, bank charges, legal fees and the costs to buy another home if you want to rebuy – meaning tens of thousands of dollars lost.
So assuming you or your partner wants to buy out the property and take over any debt on it – how does it work? Lenders have specific rules on how to handle divorce settlements. To have one party takeover the loan you would need to do the following:
- Have a court stamped consent order completed. This can be either DIY or through a solicitor – banks do not have an issue with either. In some cases where a consent order is not provided, they can work from a statutory declaration signed by both parties noting how the assets will be split up from the divorce, who is entitled to the property in question and whether any payments need to be made to each party
- Engage a conveyancer/solicitor to handle the transfer of the title into the new owners name only (note this is done simultaneous with the finance – so you need to work with your broker at the same time as the broker needs to give your conveyancers details to the bank being used)
- Finance broker helps you apply for the new loan. The old loan must be discharged (cancelled) due to the change of ownership and a new loan is set up. The borrower taking over the loan/house will need to qualify for the loan by themselves – this is something which a lot of divorcing couples do not realise and can lead to significant issues especially if going back to their original bank and getting told they don’t qualify. By using a broker specialised in helping divorced couples untangle their property and lending, you can increase the chances being able to successfully split up your assets faster, cheaper and not be forced into selling the home
Tips for how to make sure you’re in the best position to buy out your partner in a divorce
- Get your consent order organised ASAP – many lenders will require a consent order as proof as to your entitlement to take over the property and ensure if you need to pay the ex-partner for this that you have enough funds
- Make sure you keep up the payments on the existing home loan before you take over the property – lenders will look at the conduct on the previous loan and if there are late/non payments this will reduce the options available to you and potentially increase the interest rate costs and fees.
- Speak to a mortgage broker specialised in helping people resolve their finances during a divorce situation – Gerry Bosco is experienced in this area and has helped many people be able to keep their home and not be forced to sell – even if their own original bank said no.
- Speak to your conveyancer/lawyer to find out how you be exempt from paying stamp duty in transferring the property into a single name – Revenue SA has specific rules for South Australia which can allow for exemption of stamp duty for breakdowns of relationships – doing this correctly can potentially save you 10’s of thousands of dollars
Who can help me with untangling my house/loan with the ex-partner?
Gerry Bosco is an expert mortgage broker in Adelaide with extensive experience in helping clients through the transition of separating their lending during a divorce. With his understanding of what can be seen as a complex process, he will be able to assist with making sure the correct paperwork is completed and that the process runs smoothly – taking away stress and avoiding costly mistakes.
Need advice on finding the right conveyancer or solicitor to help with your divorce? Gerry can also provide you with contacts to the relevant professionals to help you through this transition.