The family home in financial mediation

Contents 13 sections

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For most couples the family home is the biggest thing to decide, and often the most emotive.

It may be where the children are living. It may hold much of what the family owns. There is usually still a mortgage on it.

Financial mediation helps you move from “who gets the house?” to the practical options, and what each of them would actually mean for both of you.

Start with the facts

Before discussing what should happen, we need a reasonably clear picture of the property:

• who legally owns it;
• what it is currently worth;
• the outstanding mortgage, and any other borrowing secured against it;
• the approximate equity;
• the current monthly payments;
• whether there are early repayment charges or other relevant costs;
• who is living there now.

This forms part of your financial disclosure, and is then recorded with everything else in the Open Financial Statement.

If the value is not agreed, you may need an up-to-date valuation before settlement discussions can go any further.

What are the options?

There is no single answer that applies to every family.

Sell it, and divide the proceeds

If that is the route, mediation can work through the practical questions: when the property is marketed, how an estate agent is chosen, whether any work is needed first, and how the mortgage and household costs are covered until completion.

One of you buys the other out

This sounds simpler than it usually is. Agreeing a figure between yourselves is only the first part.

The person hoping to stay needs to know whether they can afford the property, and whether a lender will actually advance what is required.

A lender applies its own affordability rules. Even where both of you agree that one should take over the mortgage, the lender is not obliged to release the other borrower. That is the lender’s decision, not yours and not ours.

One stays for a period, and it is sold later

Often until the children finish school. This comes up most where there are children and nobody wants an immediate move.

It needs careful thought rather than a handshake. Who pays the mortgage, the repairs and the other costs in the meantime? When is the property eventually sold? How is the value divided at that point, and measured when?

If a deferred sale is being considered as part of a settlement, independent legal advice matters.

How much equity is there?

People tend to fix on the headline figure. “The house is worth £500,000.”

That does not mean there is £500,000 to divide. The mortgage and any other secured borrowing come off it, and there may be selling costs and other expenses in due course.

So in mediation we look at the equity rather than the market value – and even then, the property is only one part of the picture.

What if we disagree about the value?

Two people having different ideas about what the house is worth is entirely normal. One has looked at similar properties online; the other has spoken to a local agent.

If the difference matters to the settlement, it is better to get reliable evidence than to spend a session arguing about whose estimate is right. Depending on the case, that may mean estate agent valuations, or agreeing an independent professional valuation.

The mediator does not decide what the house is worth.

Can one person afford to stay?

This is often the question everything else turns on.

Someone may want very much to remain, particularly where the children are settled. The proposal still has to work financially:

• can the existing mortgage be taken over?
• is additional borrowing needed to pay the other person?
• what mortgage could that person realistically obtain?
• what would the monthly payments be?
• can those payments be sustained alongside ordinary living costs?
• would the other person then be able to find suitable housing?

A mortgage adviser is often worth involving at this stage. There is little point spending several sessions negotiating a transfer that no lender will finance.

What about the children?

If you have children, their housing is naturally part of the discussion. That does not mean one parent automatically keeps the existing home.

In one family, staying put provides valuable stability. In another, selling is the only realistic way for both parents to establish somewhere suitable to live. The wider financial position decides which.

If a court ultimately has to determine a financial settlement, housing and the needs of the children are among the matters that can weigh when it considers each person’s financial needs and responsibilities. In mediation we can explore the same practical question: what housing arrangement can realistically work for this family after separation?

What if the house is only in one name?

Tell us if that is the position.

Legal ownership is an important fact. For married couples and civil partners it does not by itself answer how property will be dealt with in a financial settlement. There can also be questions about rights to occupy a family home, or to protect an interest in it.

If ownership, home rights or beneficial interests are disputed, take independent legal advice.

And if you were not married or in a civil partnership, the legal position can be significantly different. Do not assume the divorce financial remedy rules apply simply because you lived together for a long time. Where an unmarried couple disagree about ownership, that is a question for a solicitor rather than for this page.

The home is part of the whole settlement

Looking at the house on its own produces misleading proposals.

One person may want more of the property equity while the other proposes keeping more of their pension. Someone may want to stay in the home but have very little income left afterwards. There may be savings that would help with rehousing, or debts that eat into mortgage capacity.

So the home is considered alongside pensions, savings, investments, debts, income, borrowing capacity, future housing needs and anything else relevant. Financial mediation is about seeing how those pieces fit together.

The boundary

The mediator cannot advise either of you on whether a proposal is a good deal. Take that to your own solicitor.

Once you have something that works

If you reach proposals about the home, we record them as part of the Memorandum of Understanding, with the practical detail included – a proposed timescale and how a sale is expected to be managed, or a proposed transfer, the payment to the other person and the timeframe, subject to the necessary legal and mortgage arrangements.

The memorandum does not transfer the property and is not a financial court order. Independent legal advice normally follows. If you want the settlement to become legally binding, a solicitor or other suitably qualified legal professional can prepare the appropriate consent order for the court to consider.

If you are unsure what should happen

You do not have to decide before starting. The answer often becomes clearer once disclosure is complete and the value, mortgage, equity, housing needs and borrowing options can be looked at together with the rest of the finances.

You may find there is more than one workable option. That is what mediation is there to explore.

Sources and useful information

• Family Justice Council – sorting out finances on divorce
• Family Justice Council – financial needs on divorce
• GOV.UK – money and property when you divorce or separate
• GOV.UK – mediation for money and property
• GOV.UK – staying in your partner’s property during separation or divorce
• MoneyHelper – dividing the family home and mortgage during divorce or dissolution