Separation or divorce can bring significant changes to your life, including your financial circumstances. If you own a home together, have a joint mortgage or are looking to purchase a property on your own, understanding your options can help you plan your next steps.
Whether you’re hoping to stay in your current home or start fresh somewhere new, there are a few important things to consider when it comes to your home loan.
What Happens to Your Mortgage After Separation?
If you and your former partner have a joint home loan, you’re generally both responsible for the repayments, even if one person has moved out of the property.
Separating doesn’t automatically change your mortgage obligations, and removing someone’s name from a property title doesn’t necessarily remove their responsibility for the loan.
Depending on your circumstances, you may decide to sell the property, refinance the mortgage into one person’s name or explore other arrangements as part of your property settlement.
Understanding what’s possible from a lending perspective can help you make more informed decisions.
Can You Keep the Family Home?
For some people, particularly those with children, staying in the family home may be a priority.
If you want to keep the property, you may be able to refinance the existing home loan into your name and, if required, borrow additional funds to buy out your former partner’s share.
However, you’ll generally need to demonstrate that you can afford the repayments independently.
Lenders may consider factors such as:
Your income and employment circumstances
Your existing debts and financial commitments
Your living expenses and dependants
The property’s value and available equity
Your credit history and overall borrowing capacity
A mortgage broker can help you understand whether refinancing is an option and what lenders may be willing to consider.
What If You Want to Buy a New Home?
If you’re planning to purchase a new property after separation, your borrowing capacity may look different from when you last applied for a home loan.
Moving from two incomes to one can affect how much you’re able to borrow. Your existing financial commitments, dependants and any ongoing arrangements following separation may also influence a lender’s assessment.
The good news is that buying on a single income is certainly possible, depending on your financial circumstances and the lender’s requirements.
Before you start searching for a property, it can be helpful to understand your borrowing capacity, available deposit and potential repayments.
If you’re still listed on a joint mortgage, this may also affect your ability to secure another loan, even if your former partner is currently making the repayments.
Is There Government Assistance Available for Single Parents?
If you’re a single parent looking to purchase a home after divorce, you may be eligible for government assistance.
Under the Australian Government 5% Deposit Scheme’s Single Parent Stream, eligible single parents and legal guardians with dependent children may be able to purchase a home with a deposit as low as 2%, without paying Lenders Mortgage Insurance (LMI).
Importantly, you don’t need to be a first home buyer to qualify. This means you may still be eligible even if you’ve previously owned a property with your former partner.
In certain circumstances, the scheme may also assist eligible single parents looking to buy out their former partner’s share of the family home.
There are specific eligibility requirements, including your relationship status, property ownership and lending circumstances. For example, applicants who are separated but not yet legally divorced are not considered single under the scheme.
A mortgage broker can help you explore whether this scheme or other lending options may be available to you.
Do You Need to Finalise Your Property Settlement First?
Not necessarily.
You can speak with a mortgage broker at any stage of your separation to better understand your potential lending options.
However, lenders may need clarity around your financial position, existing liabilities and any property settlement arrangements before approving a new loan or refinance.
It’s also important to seek independent legal advice regarding property ownership, settlement agreements and your rights and obligations.
Getting the right advice early can help you understand what’s achievable before making major financial decisions.
Starting Fresh? We’re Here to Help.
Navigating property and finance decisions after separation can feel overwhelming, particularly when your financial circumstances are changing.
At Bernie Lewis Home Loans, we understand that everyone’s situation is different.
Whether you’re looking to refinance an existing mortgage, keep the family home or purchase a property on your own, our experienced mortgage brokers can help you explore your lending options and understand what may be possible.
Ready to discuss your next steps? Contact Bernie Lewis Home Loans on (08) 8300 8300 or enquire through our website for a no-obligation chat.
*This article provides general information only and does not constitute financial or legal advice. Lending eligibility, approval and conditions vary between lenders and individual circumstances. Government scheme eligibility criteria apply and may change. Consider obtaining independent legal and financial advice relevant to your circumstances.
