4 practical options for handling property following separation

A relationship breaking down can present many challenges. If you own property together, your affairs could be more complex, and you might be unsure what your options are.

There’s more than one way to handle property following a separation, read on to find out more about some of the main options you might want to examine further.

It’s often advisable to seek legal advice when you’re splitting assets with a former partner before you proceed. If you’re considering leaving the joint home, a professional could help you understand the potential implications and offer guidance.

1. Sell the house on the open market

Selling your home is a common option if neither party wants to remain in the property or cannot afford to take on the financial commitment themselves.

You’ll need to take into account any outstanding mortgage and then agree how to split the equity. For some couples, this may be a 50-50 split. However, it might be more complex in some situations, such as if one person put down a larger deposit.

Once the property has sold, you could use your share of the equity how you wish, including acting as a deposit on your next home. One of the benefits of this option is that it allows for a clean break.

2. One party buys the other out

If you or your ex-partner wants to remain in the home, buying out the other party is an option.

This may be a good option if you have children and want them to remain in your current home. However, the individual staying in the property will need to consider how the mortgage will be paid and whether they’d be able to secure the necessary mortgage to release equity to pay the other party.

In some cases, you might decide not to buy the other out right away but come to another agreement. For example, if you’d be the one leaving home, you may agree to wait until a later date to receive the equity when your ex-partner will be able to take out a mortgage.

3. Rent out your former home

This is usually only an option if you don’t have a mortgage on the property, but it could work in some circumstances.

Renting out the property means you don’t need to make immediate decisions about selling it or trying to secure a mortgage to buy out the other party. It’s also a way to create a regular income, though you should be prepared for void periods where there are no tenants, which may pay for your new rent or mortgage payments.

However, it could raise challenges, such as who would be responsible for maintenance work that needs to be undertaken.

4. Release equity from the property

This is normally only an option if you are over the age of 55 and have built up a reasonable amount of equity in the property.

If one party wants to remain in the home but does not have the capital or is unable to secure a mortgage to buy the other out, equity release could be an option.

The most common type of equity release is a type of loan that’s secure against the property known as a “lifetime mortgage” and it allows you to unlock some of your property wealth that you could receive as a lump sum. So, this money could be used to effectively buy out the other party.

However, there are drawbacks to using equity release that should be carefully considered. The interest due is usually rolled up, so the total amount owed can rise significantly above the initial amount borrowed. The debt is typically repaid when you pass away or move into long-term care, which could affect the value of your estate and what you leave behind for loved ones.

It’s often a good idea to seek personalised advice before proceeding with equity release to understand what it could mean for you.

Contact us to talk about your mortgage needs

If you’re looking to take out a new mortgage following a relationship breakdown, we could help. We could work with you to assess your new financial circumstances to understand how much you could borrow and the potential costs of mortgage repayments.

Once you’ve found a property to buy, we can continue to offer support and search for a mortgage on your behalf. As a mortgage broker, we may be able to secure a deal that has a more competitive interest rate than you’d find on your own. Please get in touch to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration.