Assets and Home Loans after Divorce or Separation
Divorce or separation is never straight forward and comes with a lot of decision making related to finances and assets. It’s a time when you must re-assess your lifestyle financial goals and make best use of the assets and finances that you have to support your immediate ownership decisions and future lifestyle.
When marriages end in divorce or de-facto couples separate there is quite often a family home and/or investment property and associated home loans to be dealt with. This may involve a continuing joint ownership arrangement, selling and replacing a property or one partner buying out the other partner’s share.
In some instances, assets may be handed from one partner to the other with no exchange of money. This may involve the family home and/or investment property, which may be fully paid for, or still have a mortgage outstanding requiring the partner receiving the property to refinance the home loan into their name. This refinance may also result in the restructure of other finances involving the consolidation of credit card and other outstanding debts.
The partner who is leaving the home may need to purchase a replacement property and commence the process of investigating home loans and gaining pre-approval for a specified loan amount.
Arranging Home loans and Finance after Divorce or Separation
At times arranging finance or a home loan after a divorce or separation is not a straight forward process, as you;
- may have trouble agreeing on the property settlement figures,
- may have credit blemishes from unpaid bills as a result of the divorce or separation,
- may have stopped paying the home loan under the advice of your solicitor, or
- may not be organised financially due to the divorce or separation being sudden and unexpected.
Sometimes your finance options are limited, therefore it is advisable for you to sit down and discuss your options with a mortgage broker/credit advisor, who is also trained in the profession of lifestyle financial planning. A Community Best Advisor will format a viable and workable finance plan that will highlight as well as maximise the strengths associated with your income, savings, assets and character to enhance your prospects of achieving your post divorce or separation finance needs and lifestyle goals.
When confronting a divorce or separation, Community Best completely understands what you are going through and offers a range of financial products and financial planning services that will not only assist you to deal with your divorce or separation but also assist you to Start Fresh after your Divorce or Separation. To arrange a meeting with one of our Finance Advisors, call 1300 448 911 or email us and we will contact you to discuss your finance requirements.
Solving Ownership Issues with your Partner
There are financial and legal challenges, some obvious and some less apparent; that you may face as you attempt to settle ownership of your home and/or investment property. We have attempted to cover most of these below, please read on.
Can I just “take over” the home loan?
Put simply, no you cannot. In some countries it is possible to take over the mortgage of another person or remove someone from a mortgage agreement however in Australia this is not permitted. You will need to change your existing home loan and/or mortgage that is in both names to a new home loan and/or mortgage that is solely in the name of the person who will retain ownership of the property.
Home Loans to Buyout your Partner
Arranging a home loan to buyout your partner can be likened to arranging a home loan to purchase a property, where you are the purchaser and the seller is you and your partner. Usually the home loan amount required to purchase the property will be equal to the sum of the current loan secured by the property, plus the amount you are required to pay to your partner, or less the amount your partner is required to pay to you, as agreed upon within your divorce or separation settlement.
In the case of a partner buyout, the lenders assess your loan application similar to any other, except you will need to show proof that you or your partner, have available the funds to be able to payout the other as agreed within the property settlement and your existing homeloan will need to show a good repayment history.
As a general rule if your repayment history has been in order and you meet the standard bank criteria, then we can help you borrow up to 95% of the property value. If you are borrowing over 80% of the property value, please remember that Lenders Mortgage Insurance may be applicable. If you need to borrow more than 95% of the property value this may be achieved by providing a further security guarantee.
What if we have missed repayments on our homeloan?
It is common for people going through a divorce or separation to miss some of the repayments on their home loan. This may be due to disputes over who should pay, emotional turmoil causing people to act out of sorts or solicitors recommending their clients do not make credit repayments during negotiations of a settlement! The reason a solicitor may make this recommendation is due to the belief or possibility that your partner is likely to receive a larger share of the equity in the property and so any payment on the home loan is money down the drain!
While this recommendation makes sense from a legal point of view, you may confront adverse reactions from lenders when applying for finance due to not having an unblemished repayment history on your existing home loan. Most lenders credit policies require an applicant to have a 3 to 6 month history of perfect repayments before they will consider their application for credit.
So how can you get approved if you and/or your partner haven’t made repayments and your home loan has been in arrears?
Our Finance Advisors are thoroughly conversant with the processes used by the major banks and lenders to assess home loans required to pay out a divorce or property settlement, and are highly experienced in submitting applications encompassing mitigating circumstances. To discuss our application process and to find out what your finance or home loan options are, call us on 1300 448 911 or enquire online and we will contact you.
Property Valuation is critical for homeloan approval!
When trying to obtain a home loan to buyout your partner it is vitally important to make sure that your property is presented for valuation assessment in a presentable state. As with any home loan mortgage application, if the lender’s valuation assessment comes in lower than expected you may not be able to borrow sufficient funds, or if the lender suspects possible maltreatment of the property then they may decline your application entirely.
What if the valuation comes in low?
At Community Best we have the ability to order lender compliant valuation assessments prior to submitting a home loan application. This will enable you to choose the lender where you will receive the most favourable result and/or make value increasing improvements to the property before submitting your application.
This is a fantastic benefit as previously the only way to obtain multiple valuations was to submit multiple applications. Today this is not good practice as multiple enquiries on your credit file will adversely affect your rating within the credit score process used by most lenders when assessing your application.
Please call us on 1300 448 911 or email us to find out how we can assist you with a lender compliant valuation assessment.
Will I pay stamp duty?
In most instances you will not pay stamp duty when you buyout your partner from a property jointly owned by you and your partner. Although you may be liable for capital gains tax associated with the transfer of ownership of any investment properties.
Please consult your solicitor, accountant or financial advisor to confirm if stamp duty will be applicable for your transfer of ownership.
Do we need a separation agreement?
If you and your partner were married, a Property Contract of Sale is usually not required and your solicitor or conveyancer can usually produce a basic agreement that will enable the property transfer to be exempt from stamp duty.
If you and your partner were a de-facto couple then you should consult with a solicitor as you may need to have a separation agreement drawn up to avoid stamp duty.
An application for exemption from stamp duty also needs to be completed and supporting documents attached for assessment by the state government applicable to the state in which the property is situated.
There are different types of agreements for married couples or de-facto couples that can be drawn up between the parties to initiate the transfer process. They are commonly referred to as a Separation Agreement, Consent Order or Financial Agreement and you can complete your own agreement if you and your partner choose to do so. An Application for Consent Orders (Do it Yourself Kit) can be obtained from the Family Law Courts Website – www.familylawcourts.gov.au
Seek Legal Advice
We have tried to ensure that the information on this page is accurate however before you enter into any agreement to buy out your partner or transfer ownership you should seek legal advice from a family law solicitor.
Start Fresh after Divorce Homeloan / Buyout your Partner Homeloan
Community Best have mortgage broker/credit advisors who are also authorised lifestyle financial planners and experts in arranging finance for people who wish to buyout their partner, or who are starting fresh after a divorce or separation. For professional finance assistance call us on 1300 448 911, enquire online or email us.
As the information provided is of a general nature, Community Best accepts no liability for any loss, damage, cost or expense that arises from relying on the information provided. The information is provided solely on the basis that readers will be responsible for making their own assessment of it.
* Loans subject to application and approval. Terms, conditions and eligibility criteria apply. Fees and charges may be payable.