When marriages end in Ireland, for most people the most obvious financial problem facing them is that two homes will now have to be paid for. The next problem to consider is what is to happen to the family home and the mortgage in a divorce in Ireland.
For example, if the Family Home is worth €600k, with €50k owed on the mortgage, will one of the parties (especially the party who wishes to stay in the family home) be able to raise a mortgage to buy out the other side?
Alternatively, following a short marriage, there may be very little equity in the family home and the main question during the divorce settlement will be whether the Bank will agree to the husband or wife coming off the mortgage and letting the other party continue to pay the mortgage. There also exists the added consideration that often there will be children of the marriage and that there will be a desire they continue to live in their Family home. This is understandable as people feel that children in this situation have endured enough disruption and that it would be helpful if they could at least stay in the same home, attend the same school, and keep their friends.
Dealing with Reality
As an aside, we have frequently encountered clients in our family law practice who realise these difficulties exist and choose to do nothing. They feel that not formalising their relationship breakdown allows a certain status quo to continue. This is certainly understandable, as grasping the nettle and meeting difficult situations head-on is not the normal human reaction. The problem here is that, in general, it is better in the long term to just rip the band-aid off and deal with the situation now. Otherwise, it inevitably will have to be dealt with at some stage in the future. This can be because new relationships are formed, new properties wish to be purchased or simple things need to be done, like making a new will.
First Steps in dealing with the Mortgage and Divorce
So what should people do in this situation? It sounds simple, but the first thing to consider is that the parties should both approach a mortgage broker and set out their circumstances and their predicament. Following this, the broker will give them their options. In certain circumstances, the news will inevitably be bad, i.e. that they are not entitled to a mortgage, or the bank will not allow the other spouse to come off the mortgage.
However, at least there is some certainty here. Other times, in our experience, with good family law advice, persons receive mortgage approval who previously felt that they would not have been good candidates. I would emphasise that expertise from these family law solicitors can make a difference.
Speaking from experience, a person was refused approval because they had just taken on a new car loan, whereas they would have been approved if they had not taken on that burden and kept the car they had paid for in full.
You might say, “Well, if the Judge in my case orders the family home to be put in my name then that is all I need”. Strange as it may sound, as a pensions order without prior approval of the Pension Provider, a court order is worthless without the approval of a bank. That is why this will be one of the first questions your family law solicitor will ask you in a first consultation, namely: what are your means? What is your age? What is your ability to obtain a mortgage? Have you received approval from the bank? Etc.
Getting a Mortgage after a Divorce
Just to shed some final light and hope for persons who feel they cannot obtain a mortgage after the divorce, just remember the entire assets of the marriage are to be divided. So if one partner has a pension due of, for example, €50k per year, this is effectively a pension pot of 1 million euros, hence the value of this pot can be negotiated against the value of the property.
But remember, the first rule is to ascertain your position regarding the mortgage as it is one of the most important factors for you and your divorce solicitor to consider when attempting to get you the best deal for your life for now and into the future. If you think this sounds like your situation, contact us to see if we can work together on reaching a settlement for your mortgage and divorce.
You can read more about your property rights in the breakdown of a relationship here.
