Posted on: October 22, 2020
Director, Chartered Financial Planner
Hear Claire discuss your options when it comes to mortgages, pensions and investments during a divorce on the pensions & investments podcast.
Do you need advice? Get in touch and start a conversation with Claire. Call 01952 455775 or send an email.
Divorce And Financial Advice – Mortgages & Pensions
The divorce process is a stressful and emotional time for everyone involved and sorting the financial aspect of splitting up with your partner can be an extremely daunting one – but one that is important to get right.
As financial experts, we have dealt with many aspects of divorce financials; from mortgages to wills.
Your house and place of living is usually one of the first financial considerations you will look at in a divorce settlement.
The most common question we get asked is “can I afford to keep the house?”. It is then our job to do some fact-finding, understand your position financially and work out whether it’s feasible for you to keep your house. In doing this, it’s likely you are going to need to buy your partner out of the property, so we would also consider whether you can afford this or explore other avenues such as whether you have the option of borrowing the money.
While you may be able to afford to take on the mortgage, we also look at whether you will be able to live comfortably with the additional financial commitment of a full mortgage that was initially split between you and your partner.
It’s also important to explore other options. If you were to potentially sell your property and then look to buy another property with the equity you acquire from the divorce agreement, we will explore the maximum mortgage you can afford and the purchase level price you could be looking at.
It’s not uncommon to come out in a better position with this option, particularly if there are children involved and one partner is going to be solely responsible, there might be instances where you can negotiate having a higher equity share on the basis you buy a bigger house.
Typically we only act for one party to avoid any conflicts.
We do have couples who are amicable and they want to come and initially sit down together. If this is the case, one advisor would look after one client and a different advisor would look after the other to avoid any conflict or concerns. Quite often, we’ll have an initial meeting with a couple together to discuss all the ins and outs and then the discussion becomes a lot more separate.
One of the first things people want to sort in a divorce is the living arrangements, but
quite often, they don’t really take into account the other assets in the relationship. This can be anything from pensions, investments and savings – all of which are just as important as your mortgage, particularly if you have been the primary breadwinner in the relationship.
Once this initial understanding stage has been sorted we effectively move into the action stage. In terms of your mortgage and pension, this involves looking at the route of remortgaging, if that’s the chosen route, or we can help with a purchase application. We can then also assist with putting pension sharing orders into place.
Quite often with a pension sharing order, one person may have a pension pot with, for example, Standard Life which contains £10k. If the order states that 50% of that pension has been awarded to the other partner, they will then need to move this amount into a pension pot in their name, which is where we can help.
Once you have your own pension pot, we would review this pension and, if necessary, start to build a new plan based on your revised financial stance.
The divorce process can be stressful and there’s a huge focus on the short-term and getting things over and done with, but it’s really important not to overlook the long-term picture.
It’s not uncommon for people to avoid conversations around the likes of pension sharing because it feels like a difficult thing to approach and quite often they don’t understand enough about it. Because of this, they don’t understand the impact of not having that conversation and what it might mean to their financial wellbeing in the long-term.
Getting expert help from people like us means we can guide you through the process and ensure every box is ticked to omit any additional stress and worry in what is already a tough time.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
