What happens to our home loan when we separate?

Over 70% of the people who take our Q&A tell us they co-own property. When you separate and have a mortgage, it’s important to understand your obligations. If you intend to keep your family home, there are a few things you need to consider.

Who has to pay the mortgage if we break up?

There are often costs involved in setting up a new home and paying rent when you separate. But even if you’ve moved out, you still need to think about covering your part of the mortgage payments.

When you co-own property and are co-borrowers on a mortgage, your contract is between both parties and the lender. You are jointly and severally responsible for meeting your mortgage payments, which means that you are both responsible for the whole loan amount and not just part of the home loan.

What happens if I don’t pay my home loan?

There are a few negative consequences.

Unmet mortgage payments could affect both borrowers’ credit ratings. This could impact any future loan applications, either to refinance your current loan or to buy another property in the future.

If lenders see you as a risk, they could decline your application. Another possibility is that a lender may only offer you a loan with a higher interest rate, reducing your borrowing capacity.

The most severe result of not paying your mortgage is that a lender may foreclose on the loan and sell your property.

Rather than waiting for default notices or foreclosure, Moneysmart.gov.au recommends that you get in touch with your lender and speak to their hardship team as soon as you can to let them know your situation. You may be able to temporarily pause or reduce repayments or rearrange the terms of your loan.

What do I need to discuss with my ex-partner?

Make sure you discuss how you will split your financial obligations to meet your payments. The critical thing is not to assume anything.

Depending on your situation and financial position, you might agree that one person will cover the mortgage in full and the other will cover the rent, or you will split both costs until you settle.

What happens to my loan if I keep my home?

If one of you wants to keep your family home when you separate, there are a few considerations if you have an existing home loan.

It’s not as simple as taking on the existing loan.

If you want to take over a mortgage by yourself, a new loan needs to be established, and a lender will assess your borrowing capacity as an individual. You will then settle your old mortgage and buy out your ex-partner.
Your home needs to be revalued.

Your new mortgage doesn’t just cover what you still owe on your existing loan. It also needs to buy out your ex-partner’s agreed equity share. An independent property valuer will assess the current market value of your home.
You may have other costs to cover.

Legal fees to reach your settlement agreement, valuation and conveyancing, transfer fees, and lender’s mortgage insurance need to be considered. You may also need to cover stamp duty, although there are exemptions for separating couples – check with your solicitor.

What happens if we sell our home?

It can be a tough decision to sell your home. Sometimes this your the best financial option, but it can be a very emotional time.

If you’ve decided to sell, your existing mortgage will be settled, and you and your ex-partner will split any remaining equity according to your financial agreement.

Who should I talk to about my borrowing options?

Whether you intend to refinance and buy out your partner or sell and buy a new property, make sure you check out the numbers early. A great place to start is by speaking with a mortgage broker.

They can assess your situation and look at a range of borrowers to see if your plan is doable. They will also help you understand what counts as income for your application, get pre-approvals and apply for your loan when the time comes.

Find your borrowing options before negotiating your settlement or making any offers on a new property. Knowing where you stand early in the process may save you a lot of stress and heartache later down the track and help you move forward more quickly.

Meet the mortgage broker in our network

Angelo Nervosa, Superior Mortgage Solutions

With a 25-year tenure as principal of his own mortgage broking business, Angelo’s specialty is supporting individuals navigating their complex property situations during separation. He offers empathetic, confidential, and tailored mortgage advice to those undergoing this transition, understanding that each situation is unique.

Angelo works with you to untangle the financial threads of separation and find the best options. This allows you to move forward with clarity and confidence and reach a successful settlement. Whether you’re refinancing a joint mortgage into a single name or seeking to purchase a new home after a separation, Angelo’s assistance can pave the way for a smoother transition.

BOOK A FREE CALL WITH ANGELO

The information in this blog is from our podcast Episode 15: Buy out or sell? Mortgages and Separation featuring Jyana Papanastasiou from SCM Finance Solutions. Listen here or wherever you get your podcasts to hear more.

The Separation Guide aims to make separation and divorce simpler, more manageable and less stressful. To find out more about how one of our Network Members could support your separation, take our free three-minute Q&A.

Disclaimer
The information in our resources is general only. Consider getting in touch with a professional adviser if you need legal, financial or well-being support.

What happens to our home loan when we separate?

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What happens to my superannuation when I separate?

It’s common for separating couples to have different levels of superannuation. How you split your super in your separation sometimes comes as a surprise.

It’s important to understand that superannuation is considered property in a separation, and you both must include your super in your pool of assets. You should also understand your rights to your portion of the split.

We asked family lawyer Samantha Miller some common questions we get from separating couples about how family law legislation views superannuation in separation.

What happens if I’ve been a primary caregiver and missed out on years of earnings and super contributions?

In a property settlement, the law looks at the contributions you’ve both made to all of your assets, including your superannuation, property, other investments, and belongings. The law thinks about the direct financial contributions and indirect contributions to those assets.

For example, one person stayed home to look after children so their spouse could go out and make money and contribute towards superannuation. These contributions are considered equal, so the superannuation entitlements are considered equal.

What happens to my super if my ex is caring for our children more after we separate?

The law looks firstly at contributions during the relationship and then at each person’s future needs and earning potential. This includes the impact on someone’s future career if they need to care for their children.

It’s common for the person who has taken a greater share of the care of children during the relationship to have a lower income and to have contributed less to their own superannuation. Post-separation, caring for the children is more costly, and it also impacts the ability to earn and reestablish superannuation and financial position.

So, the law will often award a greater share of the asset pool to the parent with a lower income and a greater share of the children. Remember, the asset pool includes both of your super balances.

What happens if my partner received employer contributions while I was a sole trader or business owner and I didn’t make contributions to my super?

Just because one person didn’t contribute to their superannuation doesn’t mean they’re not equally entitled to the pool of assets.

If the money existed and was used within the marriage for the couple or family’s benefit, it would be counted just like any other asset. Each person would have the same entitlement to the asset as if they’ve contributed to it throughout their relationship.

What happens if I’ve contributed ten or twenty years of superannuation to my fund before entering the relationship?

The initial contribution, or what each party brought into the relationship, is considered in a split. That may give one person a greater pull on the assets.

If the relationship is around five years or shorter, initial contributions are given more weight. If a relationship breaks down very early on, then a settlement will often try to put the people back into the same position that they came into the relationship.

However, if a marriage is 20 or 30 years long, the initial contributions are generally not given much consideration.

What happens to any super built after the official date of my separation but before my settlement is finalised?

The couple’s entire pool of assets is included in the split when legally binding documents are lodged with the court to finalise your financial and property matters. Legally, people must disclose their current position on that day.

Someone can make arguments about why the Court shouldn’t include it. For example, it arose post-separation. But if one party has less superannuation, it’s probably because they had a greater share of childcare, and there was a disparity in their income.

If my super was released early when we were together, how are my entitlements affected after we split?

If a couple released superannuation during the relationship, it will be assumed that it was used for the good of the family unit, and it just disappeared. The couple may have used it to pay off the mortgage or just spent it, and it’s no longer in the asset pool. If it was spent post-separation for entirely personal needs, it might be notionally added back into the asset pool and notionally divided.

The legislation is designed to provide an equitable split of assets based on your contributions to the relationship. Our expert Network Members are qualified to help you get to a fair outcome so you can get on with life with a fresh start and hopefully some financial security around your retirement.

If you want to know more about splitting assets in separation and get some advice about your circumstances, complete our 3-minute Q&A. The Q&A asks you questions to help us find out about your situation. We can send you resources to read and listen to relevant to your needs. And when you’re ready, we can put you in touch with the right professionals.

To hear the full discussion with Samantha, listen to our podcast Separating with super.

Disclaimer
The information in our resources is general only. Consider getting in touch with a professional adviser if you need support with your legal, financial or wellbeing needs.

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5 tips for financial empowerment during separation

Deciding to separate from your partner is an incredibly difficult decision. If you are facing separation and you’re not across your financial situation, it can be even more overwhelming and scary. It doesn’t have to be.

In many relationships, one person takes a more active role in managing household finances. If this isn’t you, getting informed about your position, your entitlements and your responsibilities can take away a lot of the anxieties you might have.

This blog explores some of the ways you can empower yourself financially before you speak with a professional to take some of the guesswork and stress out of your decision making.

Tip 1 Keep emotions out of your financial decisions

Ending a marriage is an intensely emotional time. You may be feeling many things, from grief and loss to guilt, anger or jealousy, to relief, hope or even excitement. It is possible to swing from one emotion to another.

Our Network Member Kylie Harding from Morgans Financial says ‘it’s really, really important to try and separate the financial from the emotional’. Kylie recommends that you give yourself a little bit of time to pause and stop before jumping in and making emotion-based decisions.

One common emotion-based decision that separating couples often face is who will live in the family home. Network Member, Selena James from Future Family Law says “It’s really common to hear, “I’ve just got to keep the house. I don’t want the superannuation.”

Sometimes keeping that family home is not going to be the best financial decision for a couple’s future. Selena says it’s important to make sure that couples aren’t caught up in the emotional side of things and that they get the right advice.

If you can keep emotions out of dealing with your finances, you have the opportunity to set up your post-separation finances in a way that’s going to work best for you.

Tip 2 Do a financial stocktake so you know where you stand

Kylie says it is really important that you have a clear view of your financial position. ‘Pay attention. Try to get 100% across what is happening.’

Make a list of all your assets, including

your home and any investment properties
furniture and belongings
cars and other vehicles
money in bank accounts
shares and other investments
cryptocurrencies
superannuation
inheritances.

Make a list of all joint debt, including

mortgages
personal loans
business loans
car loans
credit card debt.

List any family or business trusts in one or both of your names.

You can also use our pool of assets calculator.

Compile this information in a central point and, if you can, have your partner agree to the information.

Having a clear idea of where you stand will help when you engage mediators and/or lawyers in the future, and will help to make any advice a financial advisor gives you targeted to your situation.

Tip 3 Write all your questions about your financial future

Don’t leave important details to chance. Write down everything you need to know so you address your questions with your partner and have clarity about your situation.

You may need answers to some of the following questions.

Who will cover the household payments, such as the mortgage or rent, and utility payments?
How will you pay for a second dwelling?
How will your joint savings be divided?
How will you deal with tax?
What changes will you make to your insurance?
If you have children, how will the financial cost of their upkeep be split?
Will child support be necessary? Which person will be obliged to pay the other?

If communication around the separation has broken down with your partner, make sure you still write down all your questions so you can raise them through your Mediator or Family Lawyer.

Tip 4 Educate yourself to get the most out of professional advice

Jack Whelan, Mediator and co-founder of The Separation Guide says ‘the more educated and more informed people are, the less vulnerable they are.’

Before you get professional advice, arm yourself with as much information about your situation as possible. Educate yourself about financial responsibilities and entitlements. This will help empower you to make the best decisions for your future. Try to get across the rules so you have expectations in line with the law. Be careful that you don’t make assumptions about what you may be entitled to.

You will get the most value from a Mediator, Family Lawyer or financial advisor if you’ve done the work before you speak. Then they can spend the time giving you advice specific to your situation.

Tip 5 Try to put tasks into smaller, bitesize chunks

All of these tips may seem overwhelming, but not everything needs to be dealt with immediately. Prioritise the important tasks and just focus on the next step.

“It’s all about compartmentalising and putting things into bite-size pieces,” says Selena.

When you have a clearer picture of where you stand and know the questions you need to get answered, get professional advice by engaging a financial advisor. They can help guide you on the big financial decisions.

If you haven’t done so already, complete The Separation Guide Q&A to help guide you through the maze of information. The Q&A asks you questions to help us find out about your situation. We can send you resources to read and listen to that are relevant to your needs and broken down into digestible chunks. And when you’re ready, we can put you in touch with the right professionals.

To find out more about financial empowerment, listen to our podcast episode, Financial Empowerment, before, during and after separation.

Note that Kylie Harding was known by her married name Kylie Macdonald when our podcast was recorded.

Disclaimer
The information in our resources is general only. Consider getting in touch with a professional adviser if you need support with your legal, financial or wellbeing needs.

5 tips for financial empowerment during separation

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Role of a Financial Advisor in the separation process

The Separation Guide team spoke with one of our Network Members, Kylie Harding from Morgans Financial, to discuss the very important role of a financial advisor in the separation process. Through our discussion we understood that while an accountant can help to establish the monetary value of assets and income streams in the relationship, a financial advisor will take a more broad approach to help guide and support clients going through significant change and/ or issues in their life.

1. How can a financial advisor benefit someone early on in the divorce process?

One of the key roles of a financial advisor is to guide clients through major life changes. Advising someone who’s going through divorce can help them gain a better understanding of their cash flow, expenses and their assets and liabilities. Making sure both are aware of what is in question to split and assist both parties to recognise what is a fair share. For separating/ divorced/ newly single parents, it’s important for them to create a financial plan early on – to ensure that all the family’s needs are met.

2. What practical steps can people take to help them get more equipped?

It’s important for a couple/client to understand the potential financial impact of divorce on themselves and their children. They need to consider the answers to the following questions: Who will stay in the home? Who will have access to which assets? Who will cover house-related expenses like the mortgage and utilities? Will there be sufficient cash flow for the spouse who has the primary custody? Are there any pre and post divorce tax issues they should be aware of and are there ways to plan around them? How will joint savings be divided? How will you deal with any taxes?

3. Are there any tips to support primary caregivers who may not be earning their pre-children salary and want to manage their money effectively? Anything we might not know about?

Beyond divorce a financial advisor can help their clients formulate a financial plan for themselves as a single person, depending on their circumstances. This is very important, especially for women who may not have been highly involved in the finances during their marriage. With the proper guidance and understanding, a newly single person can have the confidence to start anew and take control of his/her financial future.

4. What are the main financial goals you notice people have when divorcing? How does this differ across different age brackets/ socio-economic groups?

I have found a common financial goal of couples divorcing is that they want to be able to maintain their pre-divorce lifestyle, especially the children’s, but that isn’t always achievable due to the new circumstances.

For younger couples, financial goals differ because there are children involved. There are more expenses to cover like child support, education, healthcare, insurance and retirement savings. Luckily for them, they are more capable of earning and have a longer period of time to prepare for their retirement.
Younger divorcees are more focused on rebuilding their financial house like paying off debts, providing for their children’s needs and establishing their retirement savings.

For more senior couples who are separating, they may find themselves in a more complex financial situation than younger couples. Their earning capacity may be behind them and opportunities to rebuild their wealth are limited compared to those who have a long career ahead of them.

Older couples’ main goal is to have an income stream they can live off for the next 20 to 30 years. That’s why liquidating their assets helps them avoid being cash poor in their retirement years.

5. What special things do divorced women need to do to consider life after divorce, to save for retirement and plan for their future? What is the path to help them get there?

While it’s clear women who divorce have financial goals – many don’t have a clear path on how to achieve them. With women living longer, one of their top priorities after divorce should be saving for retirement. Having a financial advisor is important for long-term financial planning as it provides some clarity around what is required to achieve future goals. Things that one can consider including regularly include: tracking expenses, reviewing income, budgeting and tax planning. Changes in estate plans are also extremely important, wills and as well as beneficiaries on retirement accounts and life insurance policies all need attention and update after divorce.

Kylie Harding is a Financial Advisor and authorised Network Member of The Separation Guide. Please note that Kylie was previously known by her married name Kylie MacDonald.

You can use our calculator to help you identify assets and liabilities that need to be considered in your separation.

Disclaimer
The information in our resources is general only. Consider getting in touch with a professional adviser if you need support with your legal, financial or wellbeing needs.

Role of a Financial Advisor in the separation process

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Tag: Money Matters

What happens to our home loan when we separate?

Who has to pay the mortgage if we break up?

What happens if I don’t pay my home loan?

What do I need to discuss with my ex-partner?

What happens to my loan if I keep my home?

It’s not as simple as taking on the existing loan.

Your home needs to be revalued.

You may have other costs to cover.

What happens if we sell our home?

Who should I talk to about my borrowing options?

Meet the mortgage broker in our network

Angelo Nervosa, Superior Mortgage Solutions

What happens to my superannuation when I separate?

What happens if I’ve been a primary caregiver and missed out on years of earnings and super contributions?

What happens to my super if my ex is caring for our children more after we separate?

What happens if my partner received employer contributions while I was a sole trader or business owner and I didn’t make contributions to my super?

What happens if I’ve contributed ten or twenty years of superannuation to my fund before entering the relationship?

What happens to any super built after the official date of my separation but before my settlement is finalised?

If my super was released early when we were together, how are my entitlements affected after we split?

5 tips for financial empowerment during separation

Tip 1 Keep emotions out of your financial decisions

Tip 2 Do a financial stocktake so you know where you stand

Tip 3 Write all your questions about your financial future

Tip 4 Educate yourself to get the most out of professional advice

Tip 5 Try to put tasks into smaller, bitesize chunks

Role of a Financial Advisor in the separation process

1. How can a financial advisor benefit someone early on in the divorce process?

2. What practical steps can people take to help them get more equipped?

3. Are there any tips to support primary caregivers who may not be earning their pre-children salary and want to manage their money effectively? Anything we might not know about?

4. What are the main financial goals you notice people have when divorcing? How does this differ across different age brackets/ socio-economic groups?

5. What special things do divorced women need to do to consider life after divorce, to save for retirement and plan for their future? What is the path to help them get there?

What people are saying about The Separation Guide

Our Network Members are accredited by

Customer Satisfaction Rating

What happens to our home loan when we separate?

Who has to pay the mortgage if we break up?

What happens if I don’t pay my home loan?

What do I need to discuss with my ex-partner?

What happens to my loan if I keep my home?

It’s not as simple as taking on the existing loan.

Your home needs to be revalued.

You may have other costs to cover.

What happens if we sell our home?

Who should I talk to about my borrowing options?

Meet the mortgage broker in our network

Angelo Nervosa, Superior Mortgage Solutions

What happens to my superannuation when I separate?

What happens if I’ve been a primary caregiver and missed out on years of earnings and super contributions?

What happens to my super if my ex is caring for our children more after we separate?

What happens if my partner received employer contributions while I was a sole trader or business owner and I didn’t make contributions to my super?

What happens if I’ve contributed ten or twenty years of superannuation to my fund before entering the relationship?

What happens to any super built after the official date of my separation but before my settlement is finalised?

If my super was released early when we were together, how are my entitlements affected after we split?

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5 tips for financial empowerment during separation

Tip 1 Keep emotions out of your financial decisions

Tip 2 Do a financial stocktake so you know where you stand

Tip 3 Write all your questions about your financial future

Tip 4 Educate yourself to get the most out of professional advice

Tip 5 Try to put tasks into smaller, bitesize chunks

Role of a Financial Advisor in the separation process

1. How can a financial advisor benefit someone early on in the divorce process?

2. What practical steps can people take to help them get more equipped?

3. Are there any tips to support primary caregivers who may not be earning their pre-children salary and want to manage their money effectively? Anything we might not know about?

4. What are the main financial goals you notice people have when divorcing? How does this differ across different age brackets/ socio-economic groups?

5. What special things do divorced women need to do to consider life after divorce, to save for retirement and plan for their future? What is the path to help them get there?

You might also like:

What people are saying about The Separation Guide

Our Network Members are accredited by