by Mark Johnston
The Effect of the Economy on Property During a Divorce.
With 157,000 marriages in Britain ending in divorce every year, property is the largest and most contentious asset.
According to life insurer Norwich Union, at least 35 per cent of all couples looking to divorce are forced to sell their home just to cover the cost of the divorce itself.
As the country teeters on the brink of recession again, unemployment figures rocket and property sales slump, thousands of unhappily married couples in Britain are discovering that they simply can not afford to split.
Due to the fact that house prices have fallen in most areas of the country the value of equity in a home has eroded significantly and this has forced major compromises in a couple’s lifestyle after divorce.
Some research has even shown that a few couples have out off the decision to separate purely due to the uncertainty over house prices.
The options regarding property during a divorce are;
– sell and divide the proceeds
– the house is transferred to just one partner
– on partner buys the other one out
However, Fiona Sharp, a chartered financial planner and a specialist in divorce issues, said “splitting one household in to two is becoming increasingly difficult”.
A divorce, although of course can be sad, upsetting and a difficult time, it can be finalised with in a few months. Yet despite this in the current climate it is not the contract of marriage that is stopping couples moving on it’s their house.
Many couples are trapped in negative equity with a huge mortgage and therefore are finding it hard to sell their home.
Due to this many couples have to carry on living together as they have no spare cash to rent.
The price of divorce and the stagnant housing market have meant that couples are staying together even when marital relations have completely broken down.
Research has shown that the partner that does end up renting if they can feel that they are forced to “give up everything”.
The other issue for divorcees is that if they are able to sell up they can find themselves unable to secure a mortgage even if they have previously been a home owner for a long time.
Some lenders refuse to count divorce maintenance payments received from a former spouse as income, or will only do so after a minimum period of continuous payments.
NatWest, for example, wants to see six months of payments before it will include maintenance as income. Nationwide Building Society, meanwhile, demands three months of payments, backed by a formal or court agreement.
However, outgoing maintenance payments are usually counted as expenditure, reducing the borrowing power of the former spouse – which is usually the husband – who pays.
This therefore means that more and more people who once owned property are renting after a divorce.
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