Divorce: 7 ways to sort the mortgage
We understand your separation or divorce causes you and all the involved parties major mayhem. Yet this article ‘Divorce: 7 ways to sort the mortgage” is about Your Mortgage. For most of us, a mortgage is a part of our life. This page is about real help. By the end of your reading you are going to be equipped with knowledge about:
- How to keep your home loan and or even if your bank told “you are no longer “fit” the bank “lending criteria”
- What other non-bank solutions available for you in Australia
- Lending criteria banks look & check for when considering a home loan
Our mortgage brokers cover Brisbane & Gold Coast.
How to Pay off the mortgage when separate or divorce
Would you agree “Divorce” or “Separation” should not mean “one party keeps it all”? In order for you to be ready to separate your mortgage and keep the existing property you need to know “Current Lending Criteria”. Keep in mind “Current Lending Criteria” is like Melbourne’ weather always changing and hardly predictable. In other words what was “Good enough” for your bank back in 2008 is certainly not enough now in 2018.
Your Bank perspective point of view
From the lender (Your Bank perspective point of view): If there are two mortgage owners (You & EX-Your partner) and one of them leaves the property the second may not be able to afford mortgage payments due to one out of 4 most common reasons:
- Level of income. Now ONLY one party has to pay for all the bills and yet the mortgage payments amount remaining the same.
- Amount of equity left in the property may not be sufficient for your bank to allow you to keep the property. This is due to a simple reason – your ex-partner walks away with the half of the equity. Think about this as you would think about a deposit- for example if your house market value is $1,000,000 and currently even with 5% deposit you could buy a house yet it simply means that your level of income should be sufficient enough to pay “Principal & Interest” of your loan and plus be able to pay for all the bills.
Divorce the ex & Divorce the mortgage
Just to put it all into perspective $1,000,000=5%=$50,000 leaving $950,000 mortgage. If the mortgage is “Interest Only” with 4% Interest rate it means your payment can be $730 weekly. And you only “renting” the amount of money.
- You have just decided to become self-employed and your ABN does not have 2 years of tax“history”. This comes down to the issue above – being able to prove that your level of income is sufficient and stable.
- “Credit History”. As you would agree divorce often can be a very messy process which in turn reflects on bill payments. For instance, one ex-partner decides not to pay for the car of the other partner. Payments stuck up to the point where the credit gets reflected by a default. If this is the case a mainstream bank would not be comfortable to continue with an existing loan and this is when you two need help.
I’m not paying YOUR Mortgage …period
Ex-Couples often find themselves in the following situation: When one of the ex-partners who leave the property is even yet able to afford to pay the mortgage payments, however, chooses not to due to “convenient” view -saying “I’m not living there, so I’m not paying period”. This does nothing good for both ex-partners. Yet when people unhappy – they tend to do silly things, often means making the existing bad situation even worse…
Surely there are variations. For example, your EX might have a new partner. Your “school sweetheart” thinks – “it’s time to leave the past in the past”. As the result now you are forced to sell. Before you take such a radical step and decide to sell your existing house – ask yourself – have you or your broker talked to a few banks? Can you actually keep the property? A word of “advice” here – a bank mobile lender represents one bank only. As our experience shows often your bank is not your best option. Talk to us to get real help – complete the form below.
Property Price decision
The reason many people want to keep their property is based on the cost of a sale. Think about 3-4% real estate company fees plus the cost of property preparation for the market and most importantly the sale price decision. If however, you want to sell your property right today please check this page.
Property Price decision – if you really have to sell the property – would that be hard for you to agree on the price with your ex or not? Typically it’s a very hard exercise to get both parties into the acceptance of the market price especially if the expected price is not achieved by far due to market fluctuations.
Kids & Divorce: 7 ways to sort the mortgage
There is one more example for us to discuss. If you are the person who wants to keep the house and even have the primary care of your children but due to the fact that you had not worked for the past few years- your bank could say “NO”. And “yes” we understand you had to take care of your kids but you were not working or you were working only part-time and now not in the position to afford to pay the mortgage, unfortunately, it is often the case. The only solution is to downsize by taking a new loan.
Divorce and a Bridging Loan as the only solution.
There are typically two types of examples if you have to sell the property and have to buy one or even two new properties instead.
Option1. You decide to sell the property and buy yourself a new home. Yet you have to move out – the only viable option is to take a “Bridging loan”. This would allow you to move out to your own new home and yet you would be provided with 12 months (typically) window to sell your old home.
Option 2. You need to move out and have to buy two properties instead of one using the existing property as collateral. This would allow both of you to buy new homes. As well as to sell your ex- primary residence without additional headaches.
Refinance as the way out
Refinance to solve your divorce financial obligations and start to live your life.
You can borrow some money using your existing home- provided you can meet the new level of debt- meaning you can service the new cost of the combined mortgage amount. Using the new portion of the loan to buy the ex out and keep the house.
Alternatively, you can move out to a different house and use your existing house as an investment property yet have to pay the other party out. If you want to discuss your refinance options – please get in touch – you are simply one call away from discussing a few options about how we can structure your loan so that both of you can get on with life.
7 Divorce Mortgage Solutions
Firstly: Communication is the key. All involved parties have to understand- the longer you wait and do nothing longer all of you can be unhappy.
Call us – and we promise – we are going to make the process seamless. We are going to talk to your bank and help you to find a solution.
Secondly: There is more than one solution to the problem. As we mentioned above there a few mortgage solutions like a bridging loan or a top up or even a new loan to help you to sort the existing problem.
These solutions could help you to get in control of your life and move on to a happy state. If you are in doubt and want to discuss your situation or simply want to run a couple of scenarios – don’t hesitate – call us we are here to help.
Thirdly: Get professional help by contacting a lawyer. Some people prefer to get an “Order” from the Court. In order to have a solution about who pays the mortgage and how.
In our view – legal help is a must have. Yet a mortgage broker can help you to keep your lawyer’ bills less expensive by decreasing the number of hours your lawyers are involved in your divorce.
The fourth point: Mortgagee Sale is Not a solution.
If you really must sell your house in order to pay off the mortgage make sure you know everything about your existing home loan. For instance – do you have a fixed part of your mortgage? If yes how much is the breaking fee your bank is going to charge you?
Keep in mind a bridging home loan can help you to sell your “old” property and buy a new one.
The fifth: A court order for the sale of your house
In simple words, this is when one party had already moved out yet there is no way both parties can agree on the sale price – the only option left is the court order. This can be done before the final hearing. We think you must get a mortgage broker involved only due to one reason- the cost. Sale of your home comes with a real estate agents fee while mortgage brokers are paid by banks. It is financially better for you to sort things out financially rather than radically.
The sixth point: Both parties vacate the house to sell a vacant home and rent properties individually.
This is only when you cannot find a financial solution and buy new properties for both parties. Even with “bad credit history” we can help clients. Think about this example – a sale of a house with 750,000 price tag and 3% Real Estate Fee means each of you is going to lose $11,250. Plus advertising expenses typically about $1,000 each. In the meantime, you are going to pay someone else’s rent payments not to mention about difficulties of looking for a rental home and getting “approved” by landlords.
If you have to sell your property and you are in the process of deciding who can sell your house better – check this page about 10 Australian multi-listing websites to sell property in Australia.
The seventh: Both parties get new loans on the back of a bridging loan.
This was already briefly discussed above yet the following example can provide you with an idea about how it can be used to sort your problems.
Bridging loan example (almost real).
Imagine a couple who wants a divorce and there is no way they can agree on the fact that they want to have a fire sale of their ones loved home.
The existing home loan has enough equity. Our ex-partners have very strong feelings for each other and at this stage, communication is a big problem. With the help of our mortgage broker, the couple gets two new home loans to buy each partner a unit and puts tenants into the old house. This allows the ex-partners to keep things financially smart. The bridging loan on the existing loan allows “no payment” for 12 months. Important to note – not all banks do it. Yet there a few who can help in the described situation. As the result, our ex-couple has 12 months to sell their ex-home. This time frame allows to come up with a solution. For instance where one of them would pay the other party out yet keep the old house as an investment.
Once again we are here to help. Call us or write us. Our free, no obligation discussion you can be a step closer to a solution. After all – a divorce is not or at least isn’t supposed to be “an end of the world”.
We work Brisbane and Gold Coast wide. Complete the form below to get in touch and to discuss your options.
Vlad Ivanov is the author of “Divorce: 7 ways to sort the mortgage”.
Vlad Ivanov is a Liberty mortgage adviser and his Credit Representative Number is 510718. For real help please complete the form below.
Divorce: 7 ways to sort the mortgage
Mortgage lending criteria- what do you need to get your homeloan…again (Coming)
Self-Employed mortgage – what your bank wants to see (Coming)
Bad Credit or how to get on your feet back again after separation (Coming) and here is the video about how to buy a home with defaults
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