But why is today of all days allegedly so busy? Normally, it’s because the festive season, with its attendant family feuds and financial pressures, highlights issues that were already apparent with relationships and means that either one or both parties decides that they will take legal advice on how to split from their partner once they go back to work. Alternatively, solicitors report that another common scenario is that couples have agreed to stay together for ‘one last Christmas for the sake of the children’ prior to going their separate ways in the new year. Regardless of the reasons behind the decision to split, after custody of children the next major flashpoint in terms of litigation is often the family home. Who stays, and who goes? And crucially, who has to pay for it?
Unless your name is on the mortgage or deeds then, if you were living together but not married & have no children, the likelihood is that you don’t have any rights to the property at all
The first thing to remember if you’re separating from a partner is that rights in law around property do differ between couples who are married or in a civil partnership, and those who are co-habiting.
Co-habiting couples with one partner not on the mortgage
Whilst there is a popular misconception that a ‘common law’ husband or wife has rights to a property in the event of a split, this is often not the case.
Simply put, unless your name is on the mortgage or deeds of the property then, if you were living together but not married and have no children, the likelihood is that you don’t have any rights to the property at all, regardless of how much you’ve contributed to the bills over the course of the relationship.
This catches out a lot of people who’ve moved into their partner’s home during the course of the relationship, treated it as their own and paid towards the bills and mortgage, then find out when they go their separate ways that, because they aren’t named on the deeds of the property, they have no rights to stay in the home or to any capital.
The only way that un-married couples have rights around the property is if specific legal arrangements have been made with regards the deeds.
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However, for those who were unmarried but have children together, the law is slightly different so it’s best to get legal advice as soon as you can to determine both your own rights and those of your partner.
Married & co-habiting couples who own property together
For those who do own a property together, whether married or co-habiting, whilst things are little clearer in terms of your legal rights around property, there are a few key factors to bear in mind.
Perhaps most importantly, if you have a joint mortgage with a spouse or partner, regardless of whether you are named on the deeds as Joint Tenants (where any capital in the property is split equally) or Tenants in Common (where one party has a greater financial stake in the property than the other) should one of you move out of the property, then the person who stays needs to ensure that the full amount of the monthly mortgage payment is covered, until such times as the lender has agreed to remove one of the parties from the mortgage.
That’s because both parties are ‘jointly and severally liable’, meaning that if one isn’t able – or willing – to make their agreed contribution then the other is legally obligated cover the whole amount that’s due, irrespective of whatever arrangement the couple may have between them.
Failure to keep up to date with your mortgage payments will lead to you going into arrears with your lender, as well as seriously damaging your credit rating, which could lead to difficulties further on down the road if you decide to apply for another mortgage or any other form of finance or credit agreement, as well as the possibility of the lender instigating repossession proceedings.
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The only way that an individual is no longer responsible is if they are formally removed from the mortgage with your lender’s consent.
This involves the party who wishes to stay in the property applying to the lender for a mortgage to cover the full amount that is outstanding, based on their income.
Only once this has been approved can the other party be released from their obligations with regards the mortgage and have their name removed from the deeds of the property.
In these circumstances, the mortgage application is assessed the same way as any other, so you would need to speak to a mortgage adviser to run through all of your income and outgoings and complete a full affordability assessment. This will involve disclosing full details of any unsecured finance agreements, such as credit cards or personal loans, as well as other committed expenditure, which payments for gym memberships and child care, for example, together with normal household bills.
The good news is that factors such as child maintenance, Working Family Tax Credits and Child Benefit payments can be taken into account in terms of income calculation, however the criteria does vary between mortgage lenders.
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For example, many banks and building societies will accept maintenance payments as income, but only if they are guaranteed by Court Order and there is a track record of payments being made from the benefactor to the beneficiary.
As far as Working Family Tax Credit is concerned, because this is a benefit based on income, it’s awarded and reassessed every 12 months, and generally is only available whilst the child is in full-time education or until they are 18, whichever comes first. Because of this, many lenders will only incorporate Working Family Tax Credit in their income assessments until that point, and not for the full term of the mortgage, which may have an impact on the amount that can be borrowed.
Buying a new home
For the party who is moving out and perhaps wants to purchase their own home, then another important consideration can be that outgoings such as child maintenance payments or spousal support are taken into account when applying for a new mortgage in terms of affordability, and as such may reduce the amount that a lender is prepared to advance.
Stamp Duty is another element that’s often overlooked in these situations. If you’re buying out the other party on a property that was previously owned in joint names, you may have to pay Stamp Duty on the value of the portion of the property you’re purchasing.
Conversely, should your ex-partner remain named on the mortgage of your existing property for any reason – perhaps as a guarantor on the mortgage – and then subsequently purchase their own property as their main residence, it’s possible that, in the eyes of HMRC, this may count a second home and therefore could attract the additional three per cent Stamp Duty surcharge for second properties.
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There are exemptions both of these scenarios, which is why it’s so essential to take steps in order to understand your position on any additional tax you may have to pay, so that you can factor this into your overall calculations.
Brian Murphy, Head of Lending for Mortgage Advice Bureau explained: “For any couple going their separate ways, it’s important to take legal and financial advice as soon as possible so you understand the range of options available to you, particularly if you own a property together.
“One of the first phone calls to make after you’ve made the appointment with a solicitor would ideally be your mortgage lender to explain what’s happened, so that they are aware of your situation and can support you wherever possible, particularly whilst you are in the process of agreeing the way forward with your ex-partner. This is even more relevant if one of you is hoping to buy the other party out of the property.”
Brian concluded: “However, if you both decide that it’s just easier – both financially and emotionally – to sell the property, split the proceeds and start afresh, then it’s important to find out what, if any, redemption penalties there are with your current mortgage so that you can factor those costs in to your budget alongside any legal and estate agency fees.”
For those who’ve not yet called time on their relationship but after a tough Christmas are giving it serious consideration, one last thought; consider reviewing your legal and financial obligations before you have that conversation.
Understanding your options – and responsibilities – prior to commencing the “we need to talk” tête-à-tête with your partner can pay dividends, particularly should the conversation get heated.
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