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24 May 2016

Can you keep your home after a divorce?

A big concern for many divorcing couples is whether or not one of the parties is able to retain the family home after the financial aspects of the divorce have been dealt with.

This can be a particular worry to couples with children, who don’t want to disrupt the family home and also those couples who agree that retaining the home would be better for one of the parties, for example, for work reasons.  In addition, with the over 50s now accounting for the largest increase in the divorce rate, according to Government statistics, selling the long held and often loved family home can result in a big loss.  According to recent research from the Nationwide, 28% of divorcing couples end up selling their home.

To try and overcome this problem, some lenders are considering introducing a new style, potentially innovative, mortgage that will allow one of the parties to stay in the home after divorce, even if they do not have the financial means to do so.

Dubbed “the divorce mortgage”, the new style mortgage would allow one of the parties to borrow enough money to buy out the other so that they can stay in the home.  This new style mortgage does not exist yet but some brokers predict that it could be introduced as soon as the end of 2016.  It would appear that lenders are realising that this is an underserved area and therefore they need to think of innovative ways to enable one party to a divorce to retain the family home.

The way it is anticipated this will work is that the lender would give the party who wishes to retain the home a lump sum, which they could use to buy out the other party.  The lender would also lend an extra amount that would be deposited in the savings account and used to pay the interest on the loan over a set period of time.  At the end of the period, the borrowing party can either sell and pay the lender back from the equity in the home, or take on the full mortgage themselves if their circumstances have changed.

If there are children, the term could be for as long as any children are in full time education.

Amanda Owens, family solicitor, comments:

“The concept of a “divorce mortgage”, on the face of it, sounds like a good option for divorcing couples to consider.  Clients always find it extremely stressful when going through a divorce but especially when they are faced with having to sell the often much loved family home.  Currently the options for clients in this situation are limited.  It is often the case that clients have to look to family members or friends to provide the funds to help release the other party from any existing mortgage and to help them raise the necessary lump sum to pay off the other party.  Not everyone, however, is in the fortunate position where they can call on such help and so a “divorce mortgage” would give clients another option to look at.  Unfortunately, as solicitors we cannot give financial advice and so it is always essential that a client seeks professional advice from a financial adviser before entering into such a financial commitment.  However, it may well be a viable option for many.”

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