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Who pays the mortgage when separated?
Separation is never easy, and the financial questions may be the last thing on your mind. However, bills and mortgage payments will continue, which leads to the question: Who pays the mortgage when you’re separated?
The rule of thumb is: If you and your ex-partner are co-borrowers, each of you will have to make payments towards the mortgage. If you don’t pay these instalments, you may be in breach of your mortgage obligations. This can jeopardise future financial decisions that you or your ex-partner might make. However, the situation may vary if just one of you is listed on the mortgage.
Option 1: You continue to pay the mortgage together
If you still have a good relationship with your former partner, you may be able to both continue paying off your property like you did before you separated. However, this arrangement may not be as simple as it was previously, as a partner not living in the property will also need to cover their own accommodation expenses.
But if the property is an investment that neither partner lives in, you may be able to divide the expenses, as well as any income the property brings in, along similar lines to your asset split upon separation.
When a couple divorces or has a legal separation, they will need to divide their assets, including their property if they are co-owners. The split is unlikely to be a straight 50/50 division, but will vary depending on the couple’s personal and financial circumstances.
For example, even if one partner earned most of the income that helped to pay for a mortgage, that doesn’t mean they are entitled to a greater share of the property. Often the contribution of a partner as a homemaker and/or a parent towards the welfare of the family is considered alongside any financial contributions when dividing assets such as the family home.
The exact split in ownership, and the rights and responsibilities that flow from it, will often be worked out in mediation or in court. There may also be additional complications, such as if other loans are secured by the equity in the property. Consider contacting a legal professional for specific advice relating to your situation.
Option 2: One partner pays the mortgage
If the mortgage documents list only one partner as the borrower (such as if they were already paying a mortgage solo before the relationship began), then it may be up to them to continue to make the payments.
But what if you’re both listed on the mortgage and you’re not in the position to make payments?
If you’ve moved out and your ex-partner is living in the mortgaged house, then it may make sense to have your ex-partner pay the mortgage since you will have rental expenses of your own.
You could also choose to transfer your share in the property to your ex-partner, then have them refinance the loan and pay you your due.
If you become the primary caregiver of you and your partner’s children after a separation, your responsibility raising these kids could be considered when dividing the assets – for example, your partner could take care of the mortgage while you take care of the family. Alternatively, child support payments could go towards the mortgage on the house.
As always, the exact circumstances may vary for each couple. Consider seeking legal advice specific to your situation.
Most joint mortgages in Australia are arrangements where you are joint tenants or tenants in common.
Joint tenants are equal owners of the property and assume equal responsibility for its repayment. Under this arrangement, if one partner passes away, their ownership of the property should automatically transfer to the other partner.
Tenants in common work out a percentage split in the property ownership and responsibility for the repayments ahead of time. This could be a 50/50 split, or 60/40, 70/30, and so on. Each partner will also be able to sell their share in the property if they choose, and if one partner passes away, ownership of their share won’t automatically transfer to the surviving partner – ownership will instead be determined according to their will.
Option 3: You both decide to sell
If you and your partner are no longer interested in owning the property together, you could sell it and split the proceeds according to the agreed division of assets. You may also need to split the costs involved with selling the property, such as fees for real estate agents and auctioneers.
One partner could also consider selling their share in the property to the other, giving them sole ownership of the property. This may be easier to work out if the joint mortgage was a tenants-in-common arrangement. This may also require one partner to refinance the mortgage to become the sole owner, so they’ll need to be able to afford the repayments on their income and expenses.
If you and your partner had a joint mortgage in a tenants-in-common arrangement, you could also choose to sell your share in the property to another party separately.
Before you decide to pay the mortgage or not, it is advisable to seek independent legal and financial advice to make an informed decision. Family law can be complex, and every case will be different.
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Product database updated 20 May, 2024
