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What happens to my mortgage after separation?



Romantic relationships sometimes come to an end, and when a couple owns a home together with a joint mortgage, legal and financial considerations come into play. In New Zealand, like in many jurisdictions, the property is treated as an asset subject to division during the dissolution of a relationship.


From a legal standpoint, several options are available for handling the jointly owned property:


Selling the Home:

The home can be sold, and the proceeds are then divided between the parties. This often involves clearing the mortgage, and any extra cash becomes an additional asset for division.


Continued Joint Ownership:

Parties may choose to continue joint ownership, deciding together on the property's use. Options include turning it into a rental property or having one party live in the home while paying rent to the other.


Awarding the Home to One Party:

One party may be awarded the home, with the other receiving compensation in the form of other assets. One party may also choose to buy the other party out of their share of the home. This means the purchasing party will likely have to find finance to fund the purchase of the home. The mortgage then falls solely to them to repay.


But what about the mortgage? 

If the couple retains the home, both parties remain jointly responsible for mortgage repayments. This can lead to potential tensions, especially if one party fails to make their share of the repayments on time. To avoid complications, a legal agreement defining each party's repayment responsibilities is advisable.


Separation can be a challenging and emotional time for all the parties involved. It’s best to get the right advice as soon as possible and ensure that the correct documents are in play to ensure fair treatment. No matter what happens to the property, the mortgage still needs to be repaid until it is sold or a decision is made. If you are having issues making repayments or are looking to source finance to buy the other party out of the home, then be sure to get in touch with the team at Better Choice and we can help you navigate this time. 

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