How to resolve the existing mortgage dilemma in separating couples

As interest rates continue to rise — a typical five-year fixed mortgage deal is now more than 6 per cent — divorcing couples face a new argument in their negotiations: holding on to the cheap mortgage, either at the family home or by porting it to a new property.

In the past few months, I have had clients clash over who should keep homes with mortgages taken out years ago, sometimes with a rate as low as 2 per cent, potentially helping one of them save thousands. In some cases, this causes costly delays in finalising financial settlements, with couples ending up in the family court if they cannot agree. 

The increase in interest rates is adding to the financial pressures faced by separating couples as they try to resolve their finances against a backdrop of spiralling costs and uncertainty in the ever-deepening cost of living crisis. 

A recent survey by Stowe Family Law revealed that 60 per cent of those polled said the cost of living crisis was having a negative impact on their romantic relationship, and nearly 70 per cent are concerned about the impact of the crisis on their relationship in the future. Of those, a quarter are worried about interest rates. 

For separating couples, the immediate need is to work out how to divide their assets and use the family income to set up two homes from the same financial resources that were funding just one

It is not too difficult to see how tensions in relationships might arise. We often find financial issues cited as the reason behind a divorce enquiry, and this is increasing. Many of my clients have struggled with disagreements and worries about money, particularly as prices continue to rise and their current lifestyle can no longer be maintained. 

For separating couples, the immediate need is to work out how to divide their assets and use the family income to set up two homes from the same financial resources that were funding just one. This can bring many challenges, but one of the most difficult, and now often most pressing, is how to deal with the existing mortgage and affordability of a new one.  

The immediate issue 

Since reaching a financial settlement can take many months, it is important to look at how the mortgage will continue to be paid in the interim. If the mortgage is in both names, both parties remain legally responsible for paying it, even if one has moved out and has other housing costs such as rent to meet.