Navigating Divorce and Property Settlement: Your Mortgage Options Explained

Relationship breakdowns are emotionally challenging, and the financial complexities that follow can feel overwhelming. One of the most significant financial assets most couples share is their home, and understanding your mortgage options during separation is crucial for moving forward with confidence.

At Astute Camp Hill, we've helped many clients navigate the property and finance aspects of separation with sensitivity and expertise. This guide covers the key mortgage considerations you need to understand during this difficult time.

Removing Names from Existing Mortgages

One of the most common questions we receive is: "How do I remove my ex-partner's name from our mortgage?"

The process isn't as simple as removing a name from the title. Your lender needs confidence that the remaining borrower can service the loan independently through full income verification, updated liability assessment, property valuation, and a credit check.

Critical Point: Even if you're awarded the property in your settlement, the lender isn't obligated to release your former partner from the mortgage. The original loan was approved based on combined incomes. If you can't demonstrate sufficient income alone, you may need to refinance with a different lender or consider selling.

Qualifying for a Loan on Single Income

Transitioning from dual to single income borrowing can be challenging, but it's achievable. Lenders will consider employment income, child support or spousal maintenance (with formal agreements), government benefits, and rental income from investment properties.

Child Support Considerations: Most lenders accept child support as income, but typically only until the youngest child turns 12 (varies by lender). You'll need Family Court orders or Child Support Agency assessment, evidence of consistent payments (usually 3-6 months), and clear documentation of payment amounts and duration.

Spousal Maintenance: Can be included as income with formal court orders or binding financial agreements, evidence of regular payments, and sufficient remaining term (most lenders want at least 2-3 years remaining).

Strategies to strengthen your application: Reduce other debts before applying, build consistent savings history post-separation, consider a guarantor if needed temporarily, and explore lenders who assess income more favourably for your situation.

Using Property Settlements as Deposits

The equity you receive from a property settlement can provide the foundation for purchasing a new home. Lenders will need to see consent orders or court orders detailing the settlement, evidence that the settlement has been finalised, proof of funds transfer, and statutory declarations explaining the source of funds.

Timing Matters: Most lenders won't approve a loan based on a proposed settlement. You'll typically need to wait until consent orders are stamped by the court and funds are in your account.

Refinancing to Buy Out a Former Partner

Buying out your ex-partner's share allows you to retain the family home while releasing them from the mortgage obligation.

How It Works: Property value minus outstanding mortgage equals total equity. Each party's share (typically 50/50) determines the buyout amount.

Example: $800,000 property with $400,000 mortgage = $400,000 equity. Buyout amount: $200,000 (plus you assume the full $400,000 debt = $600,000 total borrowing needed).

To buy out your partner, you must demonstrate ability to service both the existing mortgage and the additional borrowing. If you can't borrow the full amount, consider guarantor support, retaining a smaller portion of the property, or selling and both parties purchasing smaller properties separately.

Good News: In most Australian states, transfers between spouses due to relationship breakdown are exempt from stamp duty, though conditions apply.

Protecting Your Credit Rating

Your credit rating is crucial for future borrowing capacity. Any account or loan in both names affects both credit files. If your ex-partner misses payments, your credit rating suffers equally.

Protection Strategies:

·       Close joint credit cards and personal loans as soon as possible

·       Open individual accounts in your own name

·       Ensure all bills on joint accounts are paid on time until closed

·       Monitor your credit file regularly (free annual access available)

·       Maintain communication about payment of joint debts until separated

Building Credit Post-Separation: Maintain a credit card in your name with regular, small usage, pay all bills on time consistently, avoid multiple loan applications in short periods, and keep credit utilisation below 30% of available limits.

Moving Forward with Confidence

Navigating property and mortgage decisions during a relationship breakdown requires both financial expertise and sensitivity. Every situation is unique, depending on your individual income and borrowing capacity, equity in your shared property, your housing goals post-separation, timing of your settlement, and your children's needs.

At Astute Camp Hill, we provide confidential, judgement-free advice to help you understand your options. We can assess your borrowing capacity on single income, explore suitable lender options, coordinate with your legal adviser to ensure finance aligns with settlement, provide refinancing solutions, and help you understand credit implications and protection strategies.

Contact our team on (07) 3667 8988 for a confidential discussion about your mortgage options during separation. We're here to help you navigate this transition with confidence and dignity.

Please Note: This information is general in nature and does not constitute legal or financial advice. We recommend consulting with qualified professionals including mortgage brokers, family lawyers, and financial advisers before making decisions.

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This information is general in nature and current as at September 2025. Property markets can change rapidly, and individual circumstances vary. We recommend speaking with qualified professionals for advice specific to your situation.To know more, please feel free to Contact Us and our team and I will be glad to assist.

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Disclaimer:

Credit Services and advice and any statements in this email relating to matters concerning Credit Services (as defined in the NCCP Act), are made on behalf of G F Pain Pty Ltd T/As Astute Camp Hill ABN 41 602 343 484 a corporate authorised representative of Astute Financial Management Pty Ltd (Australian Credit Licence 364253) and its authorised representatives. This email and any attachments may contain confidential or privileged information. If you are not the intended recipient, please delete this message from your system and notify us immediately by return email. Email transmissions cannot be guaranteed to be secure or error free. No guarantee is made that any attachments are virus free, it is important to scan all emails for viruses and defects before opening and using attachments. If you have any doubts about the authenticity of an email sent by a member of the Astute group of companies, then please contact us immediately.

General Advice Warning: 

This communication contains general information only and in no way constitutes the provision of professional advice, nor should it be relied on as a substitute for financial, credit, accounting, legal or other professional advice. We have not taken into account your financial situation, investment objectives or particular needs. Before making an investment or financial decision, a person must seek appropriate independent professional advice and also consider whether this information is appropriate to their needs, objectives and circumstances. The author as well as their representatives, agents and employees give no guarantees and make no representations, express or implied, as to the accuracy, currency, completeness or suitability of the information contained in this document. Nor do they accept any liability whatsoever as a result of any information herein being incorrect, incomplete or unsuitable or as a result of a person in any way using or relying on the information herein.