What happens with your mortgage if you get divorced?

Housing Market Written by Squirrel , Nov 3 2016

A divorce is always a difficult time for anyone, no matter the circumstance. Sadly, nearly one-half of all Kiwi marriages end in divorce, according to Statistics New Zealand, and it's inevitable that many difficult questions will arise throughout the process. One of the biggest factors that will be considered during a divorce is money, and if you and your partner were in the process of paying a mortgage, you'll likely be confused as to what happens next. It's a common enough question, so let's take a look at just what occurs during a break-up. It's important that you let your mortgage adviser know as soon as possible of your impending divorce, especially if you share repayment duties. If you both signed the mortgage forms, you're equally responsible for repayments, regardless of your income. This is especially true if both of you decide to move out of the property, and you'll need to keep making repayments until it can be sold.

Discussing income and equity

When a couple divorce and the mortgage situation is all up in the air, it's often the case that the partner with the lower income will be getting the most equity out of the transaction. This is because they are in less of a position to actually afford the mortgage. The higher-earning partner will get less equity out of the deal, as their wages ensure that they'll be more likely to be able to borrow money in the future, with a greater ability to pay it back. Even so, this isn't a hard and fast rule. It's simply a commonly used way to divide things up in the fairest manner possible, helping them to move on and give them their best chance of getting back on the property ladder in the near future.

A divorce is never easy - but there is still the matter of the mortgage to be discussed.

Typically, an individual's ability to borrow is largely dictated by their income and credit history.  There are countless other variables that also need to be brought into the equation - children, shared loans and so forth - and it can be difficult to know where to start. This is where Squirrel can help - we'll work with both of you to figure out the most effective financial solution.

Come and talk to us

It's always best if both you and your partner can come and talk to us about the situation. Of course, you don't have to visit us at the same time - this might not be appropriate - but it's perfectly fine for you to come and see us separately. However you decide to do things, we'll do our best to come up with a solution that will meet both of you in the middle. Be sure to get in touch with us to find out what we can do for you.


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