Divorce and selling a property
Divorce is a very emotional time for all parties. It can also be a complex process, especially if you own property together.
If you have to sell a house after divorce you will have some important decisions to make. When it comes to property you own with your spouse, this guide will help you to better understand your options and allow you to think about how you want to proceed.
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Of course, you should seek legal advice as part of the divorce settlement. Your solicitor will help you to make important decisions, such as how to approach the dividing of joint assets (the things you own as a married couple).
Dividing property after a divorce
When you begin the difficult process of divorce, your legal adviser will talk you through your options for splitting everything you own. Sometimes couples don’t agree on how to do this, which can make the process longer. However, selling a house quickly isn’t always the answer. You should ensure that you each get your share of what the property is worth, and not make do with less.
The following are the options for dividing the main asset a married couple normally has between them – the family home.
Both sell and move out
This can be the most financially viable option. It can also be very beneficial in that it can be a fresh start for both of you. The property will no longer be a worry and you can move into somewhere new with the proceeds of the sale. Once the house is sold, your solicitors can deal with the financial side of things – determining who gets what percentage of the sale value.
Choosing to sell later
Some couples decide to keep the marital home. Usually, one partner moves out, but this doesn’t mean they sacrifice any rights to ownership. This is typically when children are involved, as it might be easier for one parent to remain in the property until the children reach a certain age, or it’s more appropriate to move them from school to school.
Buying your partner out
One partner can decide to buy the other person’s share of the property. The legal ownership is transferred into just one party’s name. The other party moves out and the divorce is finalised.
Whichever option you finally decide on, the property will have to be valued.
Taking on the full mortgage
Couples often tend to transfer their joint mortgage into one person's name after a divorce, so only the person named on the mortgage will be liable for the mortgage repayments. This cuts financial ties between the two parties. A joint mortgage can negatively affect a credit score and means one person can compromise the mortgage repayments of the other party. It also means the person who is removed from the mortgage can now borrow for their own mortgage if they want to.
If one party decides to stay in a property formally owned by both parties during the marriage, a mortgage lender will recalculate whether or not you will still be able to afford the repayments.
What happens to joint mortgages after divorce?
Even after divorcing, you and your former partner will still be financially linked if you have any joint financial products. This could be a joint bank account or a joint mortgage.
This is important because if a mortgage payment is missed, both you and your partner’s credit scores can be affected. It doesn’t matter if you no longer live in the property. A poor credit score could hamper your chances of getting a new mortgage in the future.
If one party refuses to pay the mortgage, for whatever reason, it could result in the property being repossessed. In these circumstances it is important that you notify your mortgage lender about the situation straight away.
Selling your property after a divorce
There is not a huge difference in the sales process during a divorce. The property is valued and placed on the market, with viewings and offers working in the same way as a normal sale. The only important thing to remember is your divorce lawyer will be advising you on how much your share will be after the property sells, and the divorce is settled.
Are there any tax implications in dividing a property after divorce?
Capital Gains Tax
Transfers of assets between spouses or civil partners are not usually liable for Capital Gains Tax. Under new rules introduced in April 2023, this ‘no gain or loss’ time period was extended to three years after the tax year in which the separation of the marriage or civil partnership took place. Following this period any profit that is made from the disposal of property assets could expose a spouse to CGT.
Transfers of assets during a divorce settlement are exempt from Inheritance Tax until the issue of the decree absolute. There is a limit to how much money can be received by a spouse if they are resident outside the UK.
If you are unsure of any tax issues as part of a divorce settlement, you should consult an accountant or a tax specialist.
Help from haart
If you are in the unfortunate position of going through a divorce, and need to discuss selling property, talk to your local haart branch. We can help value your property and guide you smoothly through the selling process.