Separation can be an emotionally charged time. Taking the time to build a support team of legal, financial and property experts that can advise you of the future impact of your decisions will go a long way to assist you to make level-headed decisions in the present.
Along with the obvious strain of the breakdown of a relationship, there is normally an impact on property ownership, particularly in respect of any financial separation that needs to occur.
Many individuals are often left with a lump sum and want to get into the property market, or assume the property ownership with an associated mortgage.
What options are there moving forward?
UNDERSTAND WHERE YOU STAND
The usual early step is to discuss the "purchase" of the former marital home. This will impact the existing arrangements that may be in place, especially if the property is subject to a mortgage.
If both parties are on the mortgage, the remaining titleholder will need a "new" mortgage in their sole name.
For most people, this can represent a "clean break" and enable a clear path forward. However, this can also be a challenge for many individuals not easily able to take out a mortgage in their sole name.
If only one party is on the mortgage, or property is held in a family trust, you will need to seek both legal and tax advice on the best way to handle the sale or transfer of the property.
SHOULD I ALWAYS "BUY" MY PROPERTY?
Keep in mind that any property acquired during the partnership will be only one part of the settlement asset pool. In some cases, sale of the family home may be the best path forward to fund the purchase of another property.
Have a long term focus, as property is a very illiquid asset. Talk to people about their knowledge of the market, and remember property doesn’t always just go up in value.
ALLOW ENOUGH TIME
To provide financing after separation, banks require a finalised settlement agreement and where dependant children are involved, it will need to include an agreement for ongoing care. To avoid making hasty or costly decisions, allow plenty of time for this process before committing too early to a refinancing or property acquisition path.
GET ADVICE & CONFIRM WHAT YOU CAN AFFORD
A mortgage broker can provide you with the information to understand your new financial position. This will include borrowing capacity, taking into account current and future changes to your circumstances.
WHAT INCOME CAN I SHOW MY BANK?
Many newly single persons may be entering the mortgage market for the first time in a while.
For example, some individuals may not have been the prime income earner. Where they work, they may not be a traditional employee etc. They forego traditional employee entitlements and deliver services through contracting or invoicing for their time. Understand how banks will treat you is important. See our blog here for more on this.
GET LEGAL & PROPERTY ADVICE
After you have done your research, confirm your findings with someone that knows how to arrange the property transfer. Get access to legal representation to properly review all details and make sure the ownership interests are represented correctly.
CAN I USE MY SUPERANNUATION FOR PROPERTY?
Superannuation is treated as part of the settlement asset pool. As part of a separation process, there will be an agreed split for super based on the total of both parties.
That does not mean it can be accessed as cash or to be used in a property acquisition. Superannuation preservation laws still apply, and this does not change until you satisfy a condition of release, such as by reaching preservation age.
STARTING AGAIN
Talking to a broker (sooner rather than later) about your borrowing capacity post-separation can assist you to make informed choices.
For more information on this and other property matters, have a look at our Property Guide e-book too.