Getting Divorced – learn your mortgage and property options

So, if you’re in the unfortunate situation of separating or divorcing with your partner and you need to split your assets, unfortunately, it’s a common thing. And, what you’re going to want is somebody that is independent to give you advice, and maybe even advise both parties separately.

You would also be getting legal advice and if required, advice from an accountant. But let’s say you have a million dollar property (typically valued by using a market valuation) and if you still have $500,000 of mortgage debt on it. That leaves you with $500,000 of equity, and if you guys 50/50 split your assets. So you have two options:

  1. Sell the property, pay the mortgage and split the proceeds.
  2. One person can buy the other out. Generally, you will buy the equity out, so in this case for Partner A, to buy Partner B they need to give them $250,000 (50/50 split of the equity). So partner A can get the mortgage restructured in their name and topped up to $750,000. So they end up with a house valued at a million dollars, $750,000 mortgage, and $250,000 of equity. Whereas Partner B walks away with $250,000 in cash.

But, what we see sometimes is a collection of properties and if you sell these properties that are producing cash, what you’re unlikely to be able to do, especially as a single earner, maybe you’re in your 50s or 60s, is build up a rental portfolio again.

So, if they’re already in a look-through company or maybe you decide, “Hey, I can still be amicable, friendly with my ex-partner,” these can go into a look-through company. You get property managers and then you get the dividends. And so, what this might mean is you can be pragmatic about it and set up things for your kids. You don’t necessarily need to sell the properties or if you do, you can come to some sort of agreement where you split them away from each other. You can get a lawyer or accountant to manage things independently.

But what you don’t want to do in this time of confusion, hurt and frustration is quickly selling cash-producing assets, especially if the market is not right for that. And, it’s especially difficult to get back into the situation of owning rental properties on a single income as you get older.

So, get outside advice is the main suggestion here. Everybody’s situation is going to be different.  We have helped some couples. We’ve represented one mortgage advisor will help both and sometimes that actually works out quite well. If you split out your money, that person can get a pre-approval and go start looking for another property, and the other person that’s going to keep their current properties can get, you, refinancing, get better interest rates, get better cash back, reset the terms a little bit, and you don’t need to get rid of the family home, and everybody’s happy.

And, by having somebody from the outside, you’ve got somebody helping you from start to finish, and find quite often it does involve having two different banks.