Who pays the mortgage after separation in Australia? Legal facts

If you’re going through a separation or divorce, one of the first questions you might ask yourself is what happens with the family home. For most families, the family home is one of your biggest shared assets.

For Australian families it can account for 43% of household assets. And that means it can be one of the biggest sticking points when it comes to understanding just what you can (and should!) do after a separation.

As family lawyers, one of our jobs is helping separating couples figure out what to do with the family home. We’re often asked who gets to stay in the family home (an important question and one we answered in this article). The other important question that we’re asked is who pays the mortgage after separation in Australia.

Who pays the mortgage after separation in Australia?

Understanding who pays the mortgage after separation in Australia is fairly simple. It all comes down to who the borrowers are on the loan documentation. 

In most cases, a couple who have purchased a home together will have both of their names listed as borrowers on the mortgage documentation. In that case, both will be responsible for ensuring that the mortgage repayments are made. 

This doesn’t change simply because you are separating or even divorcing. And it doesn’t even change if one party moves out. As long as you are listed as a borrower, you will be responsible for making the payments. 

While this is the first thing you need to understand about your family home and separation, there are other common questions we’re often asked. 

Common questions about the family home after separation

Q1. Do I have to pay the mortgage if I move out?

The answer here is an unequivocal yes… as long as you are listed as a borrower on the loan documentation. If you, then you are responsible for the repayments, regardless of whether or not you are living in the home.

Q2. Do I lose my rights to the home if I move out?

If you move out of the home prior to a property settlement, you are still entitled to your share of the property (just as you are responsible for your share of the mortgage payments). Simply moving out following separation will not cause you to lose any rights. 

In the same vein, you also can’t be forced to leave a property that you co-own. The only exception to this is if you’re required to by court order, for example, if the court requires the property to be sold because neither party can afford to make the mortgage payments. 

Q3. What if my ex refuses to pay their part of the mortgage? 

If one party is refusing to pay their share of the mortgage, you might need to look at requesting a court order to compel them to pay.

If either of you fail to make the payments, this could negatively impact both of your credit files. And that will make it harder for you to get another mortgage (or any other credit or financing) in the future.

A4. Can we continue living together after we’re separated?

Some couples prefer to live together during the early part of their separation. This might be because they’re just trialling their separation and want to stay in the same house during that process. It might be to help their Financial Institutions ease into the change. And it might just make financial sense to live separately under the same roof.

Ultimately, however, couples who are separating or divorcing will want to divide their financial assets and responsibilities. And this will likely include the family home.

Q5. I don’t work and can’t afford my part of the mortgage. Will I be forced to move out of the family home?

Sometimes one party can’t afford their part of the mortgage – either because they don’t work, or have a much smaller income. In this case, it’s not uncommon for the Court to order the higher income earner (often the husband) to pay the full mortgage or a larger part of the mortgage pending a property settlement. 

Q6. My partner and I are separating and neither of us can afford to keep up the mortgage payments (either in whole or in part). What will happen?

In the case where neither party can afford their part of the mortgage payment, the court can order an interim property order which requires the sale of the property.

The family home and property settlement

Once you begin the process of property settlement, the family home will become part of your shared property. This includes both the asset itself (the home) and the liability (the money owed). 

If you and your ex-partner can agree on the settlement arrangements, then you can simply apply for a consent order to formalise your agreement. Part of this should cover how your family home will be handled in the split. 

If you can’t come to an agreement, then you’ll need to apply to the court for financial orders. The court will then specify how your property, income, financial resources and debts will be shared between the two parties. 

Who gets the family home in a divorce or separation?

Unfortunately, there’s no one answer to how the court will decide who gets the family home in a divorce or separation. The law regulating property settlement is contained in the Family Law Act 1975 (Cth). 

Using these regulations, the court will apply a number of factors to your unique situation to make their decision. These factors could include the contributions of each party, the best interests of any Financial Institutions or other dependents, the current and future needs of each of the ex-partners and the financial circumstances over all. 

What are your options when it comes to the home loan?

If you are working out the best solution for a shared mortgage, you have a number of options you can consider.

1. 1. You can continue to pay the mortgage together.
      However, this isn’t generally a good long term solution.
   2. One party can buy the other out of the mortgage, if they have the financial resources.
      The buying the home will need to re-mortgage in just their own name.
   3. You can sell the home and divide the profits.
      This is the typical process when it comes to a separation.
   4. You can also come up with a bespoke arrangement that suits your purposes.
      For example, this might include dividing up the mortgage repayments in an equitable way to ensure the Financial Institutions can remain in the home.

Can I be compelled to sell the family home?

Yes. The court can order the sale of a property if there is no other way to create a just and equitable property settlement. When that happens, the house will be independently valued and the court will appoint a real estate agent to sell the house for the value determined.

How to remove a name from a mortgage after separation

If you do come up with an arrangement that leaves you or your partner as the sole owner of the family home, you’ll want to ensure that you remove the other partner’s name from the mortgage.

In Australia this will involve refinancing. While some other countries allow you to transfer the title without refinancing, if you have a mortgage in Australia this is not permitted. However, refinancing is a fairly straightforward process that your current lender or a mortgage broker can assist you with. Of course, the sole remaining borrower will need to be able to show that they can afford the higher monthly repayments as well.

If you don’t have a mortgage on the family home, you can simply amend your property title to reflect the new ownership structure. You can do this by completing a transfer of title form and lodging it with your state or territory’s appropriate office (for example, in NSW this is the NSW Land Registry Services). You’ll also be required to pay some form of stamp duty or transfer duty to your state revenue office. 

How we can help

At Roger Fritz LLP, our family law specialists are experts at managing complex family relationships and property settlements. We can ensure that your family home is managed in a fair and equitable manner that is in the best interests of you and your family. 

If you’d like to chat, get in touch with us directly or request a call back via the form below.