Separating from your partner is tough enough without the added pressure of cutting any financial ties between you both. And this may be the last thing on your mind anyway.
After your split, you may be feeling unsettled and less financially secure than you once were. But try not to worry. If you have joint finances like shared credit, there are steps you can take to separate them.
Are you financially tied?
If you’re financially tied to your ex-partner, for example, if you share a mortgage or loan, your responsibility as a borrower remains the same, regardless of what’s going on in your personal life. Divorcing your partner doesn’t automatically remove you from any financial commitments.
When you make a joint credit agreement, you’re both responsible for paying back the full amount, not just half each. This means if your ex-partner stops paying, you’ll be responsible for repaying the whole amount.
If you find yourself in the difficult situation of your partner not paying - maybe there’s a lack of communication between you about the repayments - you should speak to your lender straight away.
Together, you may be able to come up with a new repayment plan that is more affordable in your current situation. Of course, this will depend on your lender, but what’s important is that you keep them informed of the situation and don’t simply stop your repayments.
What happens to the mortgage?
We understand that separating from your partner can be a very worrying time, and even more so if you’ve got a joint mortgage. But while you both consider what options you have, it’s important to keep on making your mortgage repayments. As with a shared loan, you are both responsible for all of your mortgage.
Your mortgage is a priority payment and you must make sure it’s paid on time. Falling behind can see you being hit with charges; your credit history being damaged; and, at worse, your property being repossessed.
In deciding what happens next with your mortgage, there are options you and your ex-partner can consider. If you’re planning on staying in the house, one option is to buy your ex-partner out. You’ll have to speak to your lender first and they’ll need to agree that you can afford to take on the mortgage payments on your own.
They would treat you as a new applicant and carry out affordability checks to assess whether you can keep up with the repayments.
However, you may both choose to sell up and pay off the mortgage, in which case any equity in the house will be divided between you and your ex-partner as part of the divorce. If you’re worried about what will happen to your mortgage in a divorce, check out our previous blog.
What about my other accounts?
When you share a joint bank account, you’ll need to speak to your bank to have one of your names removed from the account, or alternatively have it closed down. Your account provider will need permission from both account holders.
If you’re the primary card holder on a credit card account, but your ex-partner has authorised use, it may be worth speaking to your lender to cancel any additional cards. Remember, when you’re the main card holder, you’re solely responsible for the full amount. Your ex might have their own card to spend on, but ultimately the lender will look to you for the repayments.
Your ability to take out credit is not only dependent on your credit history, but also your ex-partner’s to a certain extent. So it’s a good idea to cut any financial associations - particularly if your ex-partner has a poor credit history.
So how do you go about cutting the financial ties? Well, you can apply for a financial disassociation, which is a term that refers to the official breaking of any financial links between you. You’ll have to apply separately to each of the three credit reference agencies - Callcredit, Experian, and Equifax – for this.
However, doing this won’t be possible until all your joint accounts have been closed or transferred into one name. But in most cases, if you’re both still jointly paying the mortgage and have lived apart for more than six months, you’ll be able to apply for financial disassociation.
We understand separating from your partner can be distressing, but it’s important to keep your finances on track – so you can avoid being left with a serious financial problem in the future.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.