Divorce and your finances

Divorce is one of the most stressful times of your life. What are the key financial considerations for those parting ways?

What happens to your home?

Assets that have been earned during the marriage belong to both of you, including your home.

If you inherited a property before getting married, this may not be considered a matrimonial asset and might be treated differently, but if you bought a house while you were married, this is a joint asset even if only one of your names is on the deeds.

Divorcing couples might sell a joint home and split the proceeds. Or one could buy out the other’s equity now or in the future. Or joint money could be used to buy a second property while keeping the existing house.

Could equity release be an option?

Over 55s can consider releasing equity from their homes in order to help them split their assets. Lifetime mortgages, the most popular form of equity release, allow homeowners to take out a loan against the property which is repaid through the sale of the home when they die or enter long term care.

Find out more about equity release.

What about renters?

If you’re renting you both have a right to stay in the home while you are still married. After you divorce it depends whose name is on the tenancy agreement. If you are named as joint tenants, you both have rights to stay so you will either need to negotiate on who stays or end the tenancy.

Savings, investments and debts

If you have savings, investments or pension pots built up while you were married, these will form part of your joint assets and either partner may have a claim on them. You may need to use some of your savings for living expenses, property expenses or buying a new car if one partner is keeping the family car, for example:

  • You will need to agree on how savings will be split
  • Debts will need to be included in any agreement, and you may need to get help from an organisation like Citizens Advice before you start separating your finances, so one of you does not end up saddled with debt that might have been run up jointly but is only in one person’s name

The Pensions Advisory Service can offer you free advice online or on the phone to talk you through the options for your pension during a divorce.

If you have children

If you have children and you end up going to court, the judge will prioritise their needs and look at what offers them the most stability. This may be to remain in the family home with the primary caregiver, which might mean delaying the sale of the family home until the children are 18.

You will also need to decide how often and when each parent will see the children and set child maintenance payments. If you can’t agree this between yourselves, the government’s Child Maintenance Service can work out what is fair and chase up the payments if needed.

Reaching a settlement

If you and your partner can reach an agreement on how to divide your assets you won’t need to go to court. If you can’t agree you may need to try a mediation service, or even go to court and have a judge decide for you. Usually their starting point will be an equal division of assets, but they will also consider:

  • Your ages
  • Standard of living
  • Ability to earn
  • Each of your roles in the marriage, whether breadwinner or main carer for children

The higher earner may need to pay maintenance to the other partner to cover living costs for a certain period.

Cutting the cost of divorce

You can cut the cost of divorce by going the DIY route rather than hiring a solicitor. You can download a divorce application form online, submit it yourself and pay the court fee. Find out more about DIY divorces at the Money Advice Service here.

You will need to involve a solicitor to make any agreement final and legally-binding. Some solicitors or family lawyers offer a free initial consultation or 30 minutes free advice, so take advantage of this if available.

You may be entitled to legal aid or help with court fees if you have low savings, are on a low income or you receive certain benefits. Find out more about financial help available here.

Useful tools

The Money Advice Service has a free calculator spreadsheet to help you organise your money during a divorce. Filling in the detailed spreadsheet will help you get a clearer financial picture, considering all the assets and debts in the relationship.

Other organisations that can help you are Citizens Advice and the Department for Work and Pensions’ Sorting Out Separation website.

calculator-reverse-775x190

See how much equity you can release

Find out how much equity you could release by entering your details below.

£

Maximum loan amount:

Important: The loan amounts above are an illustration of the amount you could borrow. The actual amount may vary depending on your individual circumstances. The figures are not guaranteed and do not constitute an offer to lend. The loan amount will need to pay off any existing mortgage secured against the same property.