HM Insights

Separation or Divorce Mortgage Payments - All You Need to Know

For many couples the biggest monthly expense is their mortgage repayment. If they separate, a priority should be working out as quickly a possible who will pay the mortgage and what will happen to the property. A recent case in Stirling Sheriff Court looked at the law in relation to this.

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How is jointly owned heritable property valued for the purposes of divorce?

The Family Law (Scotland) Act 1985 provides that matrimonial property is to be valued at what is called the 'relevant date', which is either the date upon which a couple cease to live together as man and wife or the date upon which the divorce action is served upon the other party, whichever is earlier.

Section 10(3A) of the Act provides that if a home is to be transferred to one spouse as part of a divorce settlement, its value is determined at what is called an 'appropriate valuation date'. The appropriate valuation date is a date which the parties either agree, or if they cannot agree, is the date when the court makes the order for transfer. In exceptional cases the court can determine the valuation date. The reason for this is that valuing a house at date of separation can lead to unfairness if the house increases or decreases in value between the separation date and the date when the financial aspects of separation are resolved.

Does it matter if the mortgage is in joint names or in one person's name?

If the mortgage is in joint names then the obligation to pay is known as 'joint and several'. In real terms, this means that the mortgage provider could pursue each or both of you if the mortgage is not paid.

If one person pays the entire mortgage payment, then there is an argument that half of the payments made can be sought back from the other. If the mortgage is only in one party's name, then the obligation to pay rests with that person alone.

It is also important to remember that not paying the monthly mortgage repayment could lead to the lender taking action to repossess the property.

If the mortgage is not in my name, do I have to contribute?

The answer to this question depends on a lot of factors which will be particular to your circumstances, including who decides to stay in the house, whether one of you requires financial support and each party's financial circumstances.

How are mortgage payments treated when valuing heritable property in divorce?

A recent case in Stirling Sheriff Court (Fox v Fox [2019] SC STI 3) involved a couple who had been married for 11 years and who had a child who was six at the time the case was heard in court.

Mrs Fox had continued to live in the matrimonial home with the parties' daughter following separation. She had paid the monthly mortgage repayments in their entirety since Mr Fox had moved out and she wanted the house to be transferred to her sole name.

Mr Fox was not opposed to Mrs Fox obtaining a transfer of the house, so long as he was given credit for its value in working out the financial settlement. By this time, Mrs Fox had been paying the mortgage by herself for around three years. The value of the house had not increased but the overall mortgage had decreased because of Mrs Fox's payments, making it more valuable than it had been when the couple separated.

The Sheriff in this case decided that the fairest way to value the house was to use an appropriate valuation date – this would be the date when the house was transferred to Mrs Fox.

Mrs Fox argued that if the value at date of transfer was used, then she should effectively be reimbursed for making the mortgage repayments in full between separation and the Sheriff's decision. Mr Fox's share of these payments was around £10,000. Her argument was that she would be disadvantaged, and Mr Fox advantaged, if he got the benefit of those payments.

Mr Fox argued that he too had incurred expenses in moving out, in particular having paid £12,800 in rent, while Mrs Fox had had the benefit of living in a three bedroom house.

The Sheriff decided that the fairest way to proceed was to split the value of the house equally. He took the following factors into account:

  • Someone had to move out and it was not unreasonable that Mr Fox had allowed Mrs Fox to stay in the house with their child;
  • Mr Fox was not unreasonable in renting rather than buying until the financial aspects of the divorce were settled;
  • Mr Fox had not incurred unreasonable costs in renting;
  • Mrs Fox had the benefit of living in a three bedroomed detached house in a nice area;
  • Mrs Fox had been living with a new partner but had not sought any contribution from him for living costs – had she done so this would have reduced the amount she sought from Mr Fox.

The Sheriff felt that taking these factors into account the money which Mrs Fox had spent was offset by Mr Fox's own living costs in the same period.

In addition, in this case the sheriff helpfully allowed the wife a three-month period of time to complete the transfer which gave her sufficient time to obtain her own mortgage.

Working out who pays outgoings after Separation or Divorce

It is important to get good advice at an early stage about how outgoings will be paid pending a financial settlement.

Not every couple will want to agree a transfer of property but if you do, it is important to think about the following issues:

  • How and when will the house be valued, and who by?;
  • Who is going to pay the mortgage pending transfer and in what proportions? ;
  • Is the person who wants to obtain a transfer able to obtain a mortgage?; and
  • What happens if the transfer takes longer than anticipated?

For couples who ultimately decide to sell their home, the question of reimbursement for mortgage repayments is one which can be resolved before the property is marketed for sale.

A home can be one of the most important purchases we will ever make in our lives; it provides security for the future and a home for family life and it is important that when deciding what to do after separation and how to structure settlement that you get the best advice about how it should be treated.

Get in touch

The family team at Harper MacLeod have several Law Society accredited family law specialists. We can offer initial advice and help you through the process of working out what to do when dealing with your house as part of a separation. For a confidential chat, please get in touch.