Who Pays the Mortgage After Separation?
No single family law rule requires one spouse or partner to make the mortgage repayments after separation. The position depends on the mortgage arrangements, the parties’ financial circumstances, and any agreement or Court orders in place.
Importantly, separation does not itself change the obligations you have to your lender.
Who is responsible for the mortgage after separation?
The first issue to consider is whose name is on the mortgage.
Where both parties are borrowers, they will generally remain responsible to the lender for the mortgage despite their separation. Moving out of the property does not remove a borrower from the loan or transfer responsibility to the person who remains living there.
Similarly, an informal agreement between former partners that one person will make the repayments does not alter the lender’s contractual rights.
This means that if repayments are missed, the lender may be able to pursue either or both borrowers in accordance with the lending arrangements.
Does the person living in the house have to pay the mortgage?
Not automatically.
It may be practical for the person remaining in the home to make some or all of the mortgage repayments, particularly if they have sufficient income. In other circumstances, the person who has moved out may continue contributing to the mortgage, or both parties may continue making payments.
The appropriate arrangement will depend on factors such as each party’s income, other expenses, care of children and ability to obtain alternative accommodation.
The arrangement immediately following separation is also not necessarily the arrangement that will ultimately apply when the parties resolve their property settlement.
What if one person pays the mortgage after separation?
Mortgage repayments made after separation can be relevant when the parties later negotiate or litigate their property settlement.
However, paying the mortgage after separation does not necessarily mean that person will receive a dollar-for-dollar reimbursement or a correspondingly larger share of the property.
Under the Family Law Act 1975 (Cth), the Court considers the parties’ property and liabilities and applies the statutory framework for determining whether, and if so, what, property settlement orders should be made. The parties’ financial circumstances and contributions following separation can form part of that assessment.
The wider circumstances may also matter. For example, one person may have been paying the mortgage while the other met expenses for the children or paid rent for alternative accommodation.
Post-separation mortgage payments should generally be considered in the context of the parties’ overall financial circumstances rather than in isolation.
What happens if neither person can afford the mortgage?
Ignoring missed repayments can place both the property and the parties’ financial positions at risk.
Where mortgage payments are becoming unaffordable, options may include contacting the lender about available hardship assistance, agreeing on how repayments will be managed temporarily, refinancing where possible, or considering whether the property needs to be sold.
If the parties cannot agree, legal advice should be obtained about whether interim Court orders may be appropriate.
Can you stop paying if you move out?
Moving out does not by itself release you from a mortgage for which you remain legally liable.
A person considering stopping payments should understand the potential consequences before doing so. Arrears may affect both borrowers, including their credit position, and ultimately the lender may exercise its rights in relation to the property.
The fact that one person no longer lives in the home may be relevant to negotiations between the parties, but it does not automatically alter the lending arrangements.
Can one person take over the mortgage after separation?
Sometimes one party wishes to keep the family home as part of the property settlement.
This may involve refinancing the home loan into that person’s sole name and arranging for the other party’s interest in the property to be removed from the title. Whether this is possible will depend on the proposed property settlement and whether the lender is prepared to approve the refinancing.
Should you keep records of mortgage payments after separation?
Yes. Both parties should retain clear records of payments made following separation.
Bank statements, mortgage statements and records of other significant household and property expenses may become relevant when resolving the financial relationship.
It can also be useful to document any interim agreement about who will pay the mortgage, rates, insurance and other property expenses. This can reduce uncertainty about what was agreed while a longer-term property settlement is being negotiated.
Who pays the mortgage while a property settlement is being negotiated?
Former partners can agree on an interim arrangement without necessarily determining their final property settlement. For example, an agreement about mortgage payments for the next few months does not have to determine who ultimately retains the property or how the overall asset pool will be divided.
Where agreement cannot be reached, the circumstances may require consideration of interim financial arrangements or Court orders.
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