How will the bank split the property after a divorce?

[Carol S]

My husband and I took out a joint mortgage on a property after we got married. Unfortunately, after 7 years together, we have to call it quits. How will the bank split the property? Since my husband is remarrying and does not need the property, I want full ownership of the home.

[Otto Dargan]

Hello Cheryl.

Welcome to the forums.

Thank you for reaching out to us and sorry to hear about the divorce.

Firstly, you will need to get legal advice and set up a contract with the agreed price of the property. Once the property is valued, you will need to consider the share your husband will receive.

It is advised that you come to an agreement between yourselves but if you cannot agree on matters between yourselves and need to take it to court, then the following will be taken into consideration:

• The contributions both of you made before purchasing the property like stamp duty, deposit, etc.
• The contributions made during ownership like mortgage repayments, and financial contributions made like earnings, savings, etc.
• Even non-financial contributions like being a homemaker is considered.
• The person's future earning capacity
• The age and health of you and your wife
• If there are any children and who will take care of the children.
• The length of your relationship.

For full ownership of the property, you will need to buy out your husband’s share of the property. You’ll need to refinance the loan to a new loan that is solely in the name of the person who will retain ownership of the property.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,

[Carol S]

Thanks for the information. How does refinancing work in my scenario?

[Otto Dargan]

Hi Cheryl ,

A refinance in this case is the same as applying for a new home loan, so the same bank lending criteria will apply.
Also, you:

• Must have good repayment history on your existing loan.
• Must be able to prove you have funds to pay out your partner.
• Don't need to prove genuine savings.

Lenders will also look into your borrowing power since you’re going from a two-income family to sole income.

If you're planning on residing in the property after the divorce, then you are exempt from Capital Gains Tax.

Cheers,

[Carol S]

It’s a relief for me than to not have to pay the capital gains tax. However, my husband's lawyer had advised her not to contribute to the repayment as she would be selling her share to me. So, there are a few payments missed. Will this cause a problem?

[Otto Dargan]

Hi Cheryl,

It is understandable for a few missed repayment situations to arise in cases of a divorce settlement. It is a common occurrence when going through a divorce or separation because of advice from a lawyer not to make repayments on the mortgage as it is believed that the other partner will get a larger share of the equity.

Most lenders will require at least 6 months of perfect repayment history before they refinance your loan. Some of our specialist lenders might accept a 3-month history, as long as there are no blemishes on your credit file.

It's best to write an explanation letter regarding the missed payments as well.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,