Can You Legally Remortgage During Divorce?
The short answer is yes, it is technically possible to remortgage during divorce proceedings, but there are important legal and practical considerations that you need to be aware of before doing so.
If the property is in joint names, both parties will need to consent to any remortgage. Neither spouse can unilaterally remortgage a jointly owned property without the other's agreement. If your relationship has broken down to the point where cooperation is difficult, this can present a significant obstacle.
Even if the property is in one person's sole name, the other spouse may have a legal interest in it as a matrimonial asset. In England and Wales, a spouse can register a matrimonial home rights notice (sometimes called a Home Rights notice) at the Land Registry, which protects their right to live in the property and prevents it from being sold or remortgaged without their knowledge.
From a legal perspective, you should be cautious about making significant financial changes during divorce proceedings. Courts expect both parties to provide full and frank disclosure of their financial circumstances, and any attempt to reduce equity in the home or increase borrowing without proper agreement could be viewed unfavourably by the court.
If you are considering remortgaging during your divorce, it is essential to discuss your plans with your family law solicitor first. They can advise whether it is appropriate in your circumstances and ensure that any action you take does not prejudice your position in the financial settlement.
There are circumstances where remortgaging during divorce is not only acceptable but advisable. For example, if your current mortgage deal is ending and you would otherwise move onto an expensive standard variable rate, switching to a new deal to reduce costs is generally considered reasonable by the courts, provided both parties are aware and agree.
Reasons to Remortgage During Divorce Proceedings
While remortgaging during divorce requires careful consideration, there are several legitimate reasons why it may be necessary or beneficial during this period.
Avoiding the standard variable rate. If your current fixed or tracker deal is coming to an end, you could find yourself paying significantly more each month on the lender's standard variable rate. Remortgaging to a new deal can reduce monthly payments at a time when both parties may already be under financial pressure from running two households.
Reducing monthly outgoings. Divorce often creates immediate financial strain. Remortgaging to a lower rate or extending the mortgage term can reduce monthly payments and provide much-needed breathing space while the settlement is being negotiated.
Releasing equity for immediate needs. In some cases, the court may allow equity to be released to fund essential costs such as a deposit on rental accommodation for the departing spouse, legal fees, or urgent household expenses. This should only be done with proper legal advice and ideally with the agreement of both parties.
Implementing an interim arrangement. Where it is clear that one party will eventually keep the property, an interim remortgage can allow them to begin managing the mortgage independently while the full financial settlement is finalised. This can demonstrate to lenders that the remaining party is capable of meeting the payments alone.
Protecting both parties' interests. If one party is concerned that the other may stop contributing to the mortgage, remortgaging to a more affordable deal can reduce the risk of payment defaults that would damage both parties' credit scores.
Whatever the reason, any remortgage during divorce proceedings should be carried out transparently and with proper legal advice. Attempting to change the financial landscape of the marriage without your spouse's knowledge is likely to have serious consequences in the settlement negotiations.
Legal Considerations and Restrictions
Remortgaging during divorce is subject to several legal constraints that you must understand before proceeding. Ignoring these can lead to serious consequences, including adverse findings by the court in your financial proceedings.
Duty of full and frank disclosure. Both parties in a divorce have a legal obligation to disclose their full financial circumstances to each other and to the court. This includes any changes to mortgage arrangements. Attempting to remortgage secretly or to change the equity position in the property without disclosure is a breach of this duty and can result in severe penalties.
Freezing orders. If one party is concerned that the other may try to dissipate assets, they can apply to the court for a freezing order or injunction preventing any dealings with the property, including remortgaging. If such an order is in place, any attempt to remortgage would be a contempt of court.
Matrimonial home rights. In England and Wales, a non-owning spouse has the right to register a notice at the Land Registry protecting their right to occupy the family home. This notice will appear on title searches conducted by potential new lenders, and most lenders will not proceed with a remortgage while such a notice is in place without the consent of the person who registered it.
Impact on financial settlement. The equity in the family home is a key factor in determining the financial settlement. If you remortgage and increase the borrowing against the property, you are effectively reducing the equity available for division. The court may take a dim view of this unless it was done for legitimate reasons and with proper agreement.
Consent requirements. For jointly owned property, both parties must consent to a remortgage. For property in one party's sole name, the other party's consent may still be required if they have registered home rights or if the court has made any orders restricting dealings with the property.
Always consult your solicitor before taking any steps to remortgage during divorce proceedings. The legal landscape is complex and the consequences of getting it wrong can be significant.
