My partner and I are separating: Can one of us keep our joint mortgage?
My partner and I recently took a five-year fixed mortgage deal but we are now splitting up and selling the house.
As we both plan to buy a new property, would it be possible for one of us to port the deal to a new mortgage, keep the existing rate and avoid an early repayment charge? It is with Nationwide.
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David Hollingworth replies: Splitting up when a relationship comes to an end is never easy, and dividing up your money and property is only likely to add to those issues.
Mortgages can often need to be reviewed and rethought as a result of the split, which can open up various problems.
A couple going in separate directions can potentially lead to a need to sell the current home.
Selling a home will come with cost in its own right including estate agency fees, legal costs and removals, let alone other costs to buy another property.
Paying off the current deal would be likely to add to that cost. Most fixed rates will carry an early repayment charge (ERC) throughout the fixed rate period and that will be true of Nationwide’s deals.
The exact charge will probably depend on the terms of the deal itself and how long ago it was taken.
Many products will charge an ERC as a percentage of the amount repaid, but also allow the mortgage holders to make some level of penalty-free overpayments, typically 10 per cent per annum.
These charges will often step down throughout the period of the fixed rate, so the percentage drops over time.
Nationwide’s current five year fixed rates charge an ERC at 5 per cent in years one and two, then 4 per cent, 3 per cent and 2 per cent for each remaining year of the fix.
It’s important to check the specific detail on the product as the charging structure can vary with time, so could differ (and possibly be less) than the current approach.
However, there may not be a need to take the ERC on the chin as an additional cost if one of you plans to remain in the current property or plans to move to a new property.
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Can you port a mortgage after a split?
Porting is when the mortgage is transferred to a new property and so avoids the payment of an ERC.
As mortgage rates have increased, the ability to keep hold of an existing deal has become even more valuable. Depending on when you took the original deal it could be significantly sharper than the mortgage rates currently on offer.
That could make it much cheaper to keep hold of the current deal, and so is well worth exploring. In fact, in the current climate the mortgage may be so much better that deciding who gets to keep it could be a bone of contention between separating partners.
Some lenders can even allow the existing mortgage to be split between separating couples, which would enable both to hold on to a share of the mortgage.
In the current climate, the existing mortgage rate may be so much better that deciding who gets to keep it could be a bone of contention
Others will enable the existing mortgage to be ported, but not split. Then, it will essentially come down to the first person to reach offer stage getting to keep the deal.
Nationwide isn’t able to split the loan to be ported to different properties, but in this case it sounds as though one of you will be able to take the deal to a new property.
However, it’s always worth pointing out that porting a mortgage to a new property will be reassessed according to the lender’s criteria at the time.
Taking a mortgage from two names to a single name is likely to see the level of income falling, so affordability can be pressured when couples split up.
It’s therefore worth taking advice on your individual circumstances to understand how the criteria will match up, and make sure that as much income is taken into account as possible.
For example, lenders can take very different approaches to maintenance income, where applicable.
Hopefully there won’t be too much complication, and one of you will be able to keep hold of the lower rate and avoid a chunky early repayment charge.
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David Hollingworth is This is Money’s mortgage expert and a broker at L&C Mortgages – one of Britain’s leading specialists.
He is ready to answer your home loan questions, whether you are buying your first home, trying to remortgage amid the rates chaos or looking to plan further ahead.
If you would like to ask him a question about mortgages, email: [email protected] with the subject line: Mortgage help
Please include as many details as possible in your question in order for him to respond in-depth.
David will do his best to reply to your message in a forthcoming column, but he won’t be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.