When you are facing a separation from a partner with whom you own property, disentangling your finances often involves remortgaging, especially when one party wishes to maintain ownership of the property. Typically, when the couple owned the property as joint tenants, the person who wants to keep the house purchases the other partner's equity and becomes the sole owner. The partner who is moving out is removed from the title deeds, and the remaining partner may then take out a new mortgage in their sole name.

It is not always necessary to remortgage in these cases, but you cannot remove someone from the mortgage without the lender’s consent, and most people find that they need to restructure their arrangement to continue to make payments. Your mortgage lender will review the terms of your current deal to determine whether it would be viable for you, and it is often wise to seek a new deal at this stage with repayment terms that you can more easily meet with only one household income.

There are some common challenges that can arise in these cases, but there are also steps you can take to overcome them and secure the best deal. If you’re married or in a civil partnership, financial settlements may affect how equity is divided, and any change in income will affect your borrowing capacity, your liability and other factors. Here, the experienced remortgage solicitors at JMW address some of the common problems people face when looking to remortgage after a break-up or formal separation, and the steps you can take to strengthen your position.

Do I Need to Remortgage Following a Separation?

Retaining the family home following a separation often requires you to buy out your ex partner's share. If you own the property as joint tenants, the other party's equity will be based on a calculation of how much you have paid towards your current mortgage, the overall valuation of the property, and the division of assets in any financial agreement or family court order that has been made following your separation.

In many cases, the family court awards a larger percentage of the family home to the primary caregiver, as the court prioritises the welfare of children above all other factors during a divorce settlement. This can mean that if you earn significantly less than your ex partner, you require more capital to secure suitable housing.

Your solicitor will use a property valuation to quantify your ex-partner's exact beneficial interest in the property based on the current market value, and then you must raise funds to pay this lump sum. A typical way to achieve this is by releasing equity and remortgaging the property at a higher loan amount.

In these circumstances, you replace your current mortgage deal with a new mortgage, consolidate the existing mortgage balance and the additional funds for the buy-out into one product. Your loan-to-value ratio increases as a result, which may affect your interest rates, but a mortgage advisor can help you to find the best available deal.

How Does Being Separated Make a Mortgage Application More Challenging?

Being separated fundamentally changes how a mortgage lender views your financial position. Lenders treat your remortgage request as a brand-new mortgage application, and will assess your financial circumstances based on your new financial circumstances, meaning your single income and any new outgoings.

If you receive child maintenance or spousal maintenance following a separation, some lenders will factor this directly into your income. Conversely, if you are paying maintenance, lenders treat this as a committed monthly expenditure, which automatically reduces your borrowing limit. If you previously applied on the basis of a dual income, the terms available to you may be less attractive than your previous deal.

At the same time, your credit files stay connected to your ex partner. If your ex partner misses a payment on joint bills, this could immediately impact your credit score. Lenders view this ongoing financial link as a severe risk. They will scrutinise your current debt to income ratio based on your bank statements and other documents, and subtract the full value of any existing joint mortgage from your affordability calculation. These factors can further affect the mortgage options, interest rates and terms available to you.

If you cannot show that you will be able to make the monthly payments on the existing mortgage, you may get a better deal from a remortgage.

Is a Remortgage the Only Way to Separate Property?

A remortgage is not the only option, but it is often the most suitable. Another option is to remove one partner from the joint mortgage through a specific legal procedure known as a transfer of equity. You cannot remove someone from both the mortgage and title deeds without their express consent, and a legal transfer of ownership so that only one person remains on the property title. The remaining owner must prove they can manage the mortgage repayments independently and pass a lender's rigorous stress tests to make sure the transfer is not rejected.

Your solicitor can handle this process on your behalf and advise you of the legal process involved in this. They will use the transfer of equity to update HM Land Registry to reflect your sole legal ownership of the property. This is separate from the divorce process and you should work with an experienced property solicitor to structure the ownership terms in the most efficient way for your needs.

If you want to buy out your partner's equity, you may utilise personal savings to bridge the gap. However, if you lack the liquid capital to cover the valuation costs, legal fees and equity buy-out, a remortgage may be the most viable option. Similarly, if you have negative equity - which happens when the outstanding mortgage balance exceeds the current market value of your property - you cannot release equity to buy out an ex partner's share. The property holds no net value in these cases and you should seek mortgage advice to understand your options.

How Can I Strengthen My Financial and Legal Position Post-Separation?

There are several actions you can take immediately following a separation that can improve your financial position or, if opportunities are missed, make the situation worse and remortgaging more difficult.

Avoid missed payments and protect your credit score

Do not stop paying your mortgage payments or joint bills, whatever short-term arrangements you have made. If your name remains on the mortgage agreement, you are legally liable, and missed payments will severely damage your credit rating. A poor credit record will prevent you from securing a new mortgage deal.

Get a formal financial settlement through the court

While it is possible to agree financial and child care arrangements informally, you can also pursue a court order to have these formalised and made enforceable. This is often the best approach, particularly when it comes to a clean break.

Bear in mind that verbal agreements and informal arrangements hold no legal weight. Securing a formal legal framework is the only way to establish a stable financial position and prevent your ex-partner from making future financial claims against you.

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A common problem is rejections based on affordability - a lower income and regular outgoing maintenance payments will sometimes reduce your borrowing capacity to below what you would need to secure a mortgage on your current property. However, there are options in these cases, including a joint borrower sole proprietor mortgage, which is a modern equivalent to a guarantor mortgage. In these cases, a family member adds their income to the mortgage application as a guarantor to satisfy strict affordability checks. They do not join the title deeds, so there is no associated Stamp Duty surcharge for owning a second home, and you retain sole legal ownership of the property.

Ask your current lender to offer temporary support

Your lender may offer temporary support, such as a payment holiday during divorce proceedings, to give you breathing space while any financial settlement negotiations are ongoing. Alternatively, asking the lender to extend the mortgage term serves to reduce monthly payments temporarily, helping you to avoid a mortgage default and preserve your ability to remortgage in the near future. However, this can result in you paying more in interest over time, so you should speak to a financial adviser or mortgage broker about your options before pursuing this route.