Unfortunately, separation is a fact of life for many Australians. During this emotionally stressful time, couples may feel like they’re in a constant state of flux, with many significant changes occurring all at once. During this time of upheaval, one of the biggest questions that may arise is who pays the mortgage after separation?
An Important Question: Who Pays Mortgage After Separation?
In Australia, around 70% of household wealth is tied up in property (according to a report from AMP). This makes the family home one of the biggest assets that you may jointly own. The fact that you and your ex are no longer in a romantic partnership does not automatically dissolve your financial partnership, and the mortgage still has to be paid every month.
An accurate understanding of who pays the mortgage after separation in Australia will not only simplify financial matters now, but it will also help to protect your credit score and financial future.
Who Pays the Mortgage After Separation in Australia?
According to Australian law, the answer to this question is fairly simple. Paying the mortgage after separation is the responsibility of whoever is listed as a borrower on the loan documentation. Most of the time, if a couple have purchased a house together, both names will be listed on the contract. This means that both parties are still responsible for making sure the mortgage is paid on time (regardless of who is still living on the property).
Mortgage After Separation: What Are Your Options?
In the immediate aftermath of a separation, you will likely have a joint responsibility to ensure payments are made on time. But long-term, deciding after separation who pays the mortgage will ultimately depend on what kind of agreement you come to with your ex. Some of the most common options include:
1. You Both Keep Paying
While this isn’t generally recommended as a long-term solution, you can continue to pay the mortgage together for as long as you like.
2. One Person Buys Out the Other
If one of you has the borrowing capacity to buy out the other, then the buyer will need to re-mortgage the property so it is just in their name.
3. You Come to a Personal Arrangement
Depending on your situation, you may decide to come to a personal arrangement over who retains ownership of the house. For example, if children are involved, a couple may decide that the primary caregiver stays in the house and takes over responsibility for the mortgage, while the secondary caregiver relinquishes their claim on the property.
4. You Sell the Property and Pay Out the Mortgage
This is one of the most common solutions after separation. Selling the property allows you to pay off the mortgage, and then any remaining funds can be split evenly between the two of you.
Finalising the Paperwork: After Separation Who Pays the Mortgage?
Once you’ve decided who will be responsible for the mortgage (long-term), it’s important to follow through by finalising the paperwork. Remember, as long as both names are on the loan contract, you will both be responsible for making repayments (regardless of what personal agreement you may have come to).
In Australia, removing someone from a home loan will require refinancing. You may have the option of refinancing the loan with the same lender, or you may refinance to a new lender who is now offering a more competitive interest rate or a more suitable loan product for your changed financial circumstances. To ensure you get the best loan to suit your needs, talk to an experienced mortgage broker about refinancing.
Talk to ZEP Finance About Who Pays Mortgage After Separation
Deciding who pays the mortgage after separation can be a stressful process. The key to success? Start by getting the right financial advice. The experienced team of mortgage brokers at ZEP Finance can walk you through the different options available and will happily answer all your questions.
For free and expert advice that you can trust, contact the team at ZEP Finance today.
After studying business and finance at university, Zain initially expected to pursue a career in finance. However, his passion for property and the experience of buying his own home led him to mortgage broking. He began his mortgage brokering career in 2009 and founded ZEP Finance in 2010.
