Going through a divorce or separation is understandably unsettling, and having to divide shared assets – such as the mortgage – adds an extra layer of complexity. For those facing this situation, it’s important to understand how the mortgage may be affected, as well as the vital role mortgage advisers can play in helping clients navigate three common areas of conflict: managing mortgage repayments, buying out the other person, and agreeing when to sell.

How the mortgage is affected by a divorce or separation

In New Zealand, shared financial commitments and property ownership can complicate the divorce or separation process. Couples facing this situation will need to decide whether to sell the property, refinance the mortgage, or consider a buyout.

Determining how the mortgage is managed will depend on the financial situation of each person and the agreements made during the divorce proceedings. If the mortgage is in both names however, both remain legally responsible for ensuring the repayments are made on time.

Seeking legal advice to navigate the nuances of New Zealand property division law is recommended, to ensure the financial wellbeing of both parties involved in the separation is taken into consideration.

Paying rent on top of an existing mortgage

Conflict Zone: Moving from a shared home to separate living arrangements – where one person stays in the family home while the other moves out and pays rent – can be a strain on the finances.

Expert Tip: Mortgage advisers can assist by exploring potential options, such as mortgage restructuring or refinancing, to adjust the mortgage terms to better fit the new circumstances and help alleviate the financial burden. Refinancing to a longer term means you’ll pay off your loan for longer, but the repayment amounts will reduce as they’re spread out over a longer period of time.

Buying out the other person

Conflict Zone: Disparities in income between separating couples can complicate decisions about one person buying out the other's share of the property.

Expert Tip: Mortgage advisers can help by determining the value of the property, calculating the equity, and exploring options to refinance by accessing these funds for a buyout. An adviser can also help determine each person’s financial position with a financial review to ensure the person buying out can realistically afford a mortgage.

Agreeing when to sell

Conflict Zone: Deciding when to sell the family home can be emotionally charged and often leads to disagreements.

Expert Tip: Mortgage advisers can assist by providing a realistic assessment of the current property market and help the clients make an informed decision on the right time to sell. An adviser can also assist with advice on securing a new mortgage with a view to buying another home.

The right support and guidance

If you’re facing divorce or separation and have questions about managing your mortgage during this transition, get in touch with a Mortgage Express branded mortgage adviser. As experts in New Zealand’s property market, our team of mortgage advisers help clients make informed decisions about their mortgage and finances, by providing advice and guidance on the way forward.