Separation and divorce are emotionally exhausting under any circumstances. When a jointly owned home and a shared mortgage are involved, the financial complexity adds another layer of stress to an already difficult time. If you’re going through a separation in Western Australia, understanding what actually happens to your home loan and what your options are can help you make clearer decisions when it matters most.
This article isn’t legal advice, and every situation is different. But we can walk you through the key financial and lending considerations that arise when a relationship ends and a joint mortgage is on the table.
The Mortgage Doesn’t Change Just Because You Separate
This is something many people don’t realise until it creates problems: the moment you separate, nothing automatically changes with your home loan. The mortgage is a legal contract between both borrowers and the lender. Your relationship status whether you’re legally separated, have filed for divorce, or have a court order in progress has no bearing on the loan itself unless you take specific steps to change it.
Both names remain on the loan. Both people remain equally responsible for every repayment. If your former partner stops making their share of the payments and the loan falls into arrears, your credit file is affected just as much as theirs. This is true regardless of any private agreement you’ve made between yourselves.
Taking action quickly is important, not just for your financial wellbeing but for your credit health. It’s worth checking your credit score early in the process to understand where you stand.
The Three Most Common Paths Forward
When a couple separates and there’s a jointly owned home, the situation usually resolves one of three ways:
1. One Partner Buys Out the Other
If one person wants to keep the home, they need to do two things: purchase the other person’s share of the property (the buyout), and have the other person’s name removed from the mortgage. These are two separate steps that often happen in parallel.
The buyout involves paying your former partner their share of the equity in the property. The equity is generally calculated as the property’s current market value minus what’s owed on the mortgage. You’d usually need a formal property valuation to establish this figure.
Removing a name from the mortgage often called a “loan assumption” is not something you can do by simply asking the lender. The remaining borrower needs to demonstrate to the lender that they can service the full loan on their own income. This means going through a new credit assessment. If your income is sufficient, the lender may agree to remove your former partner’s name. If not, you may need to consider refinance/">refinancing with a new lender, restructuring the loan, or other options.
If you need additional borrowing capacity to buy out your partner, a home loan refinance can sometimes allow you to access the equity in the property while restructuring the loan into your name alone.
2. You Sell the Property
Selling is often the cleanest outcome when neither party can afford the property on their own, when both want to move on, or when the relationship breakdown makes cooperation difficult. The proceeds from the sale after the mortgage is repaid and any selling costs are covered are then divided between the parties, usually in accordance with a financial agreement or court order.
Our property selling cost calculator can help you get a realistic sense of what selling costs to expect, so you’re not caught off guard when the time comes.
3. Both Parties Keep the Property Temporarily
In some situations particularly where children are involved both parties agree to keep the property jointly for a period of time, perhaps until the children finish school. During this time, decisions need to be made about who lives in the home, who makes the mortgage repayments, and how expenses are managed.
This arrangement requires a high level of co-operation and a clear written agreement. It also means both parties remain on the mortgage and are jointly responsible for the loan, which can complicate each person’s ability to borrow separately during that period.
Can You Get a New Loan While Still on a Joint Mortgage?
This is one of the most common questions we hear from separated clients. The short answer is: sometimes, but it’s complicated.
If you want to purchase a new property while your name is still on the joint mortgage, most lenders will factor in your share of the existing loan repayments when assessing your borrowing capacity. Depending on your income and the size of the existing mortgage, this may significantly reduce how much you can borrow or make it difficult to qualify for a new loan at all.
Use our borrowing power calculator to get a starting point, and then speak to a mortgage broker who can assess your full picture across multiple lenders. Some lenders take a more flexible approach to income and liability assessment in separation situations than others.
Stamp Duty Exemptions in WA for Relationship Breakdowns
One piece of good news: in Western Australia, there is a stamp duty exemption available when property is transferred between former partners as part of a family law property settlement. This can apply whether you were married or in a de facto relationship, and whether the transfer is agreed between parties or ordered by the Family Court.
This exemption can represent a significant saving stamp duty on a Perth property can easily run to tens of thousands of dollars. But the exemption isn’t automatic; you need to meet certain criteria and have the right documentation in place.
Before assuming you’ll qualify, speak with both a family lawyer and your mortgage broker. The stamp duty calculator can help you understand what the standard costs would be so you can appreciate the value of the exemption.
Joint Debt and Your Borrowing Capacity
Even if your former partner is making their half of the mortgage repayments, lenders will generally treat the full mortgage as your liability when assessing any new application you make. The fact that someone else is “supposed to” be paying half is not something most lenders will take into account.
There are some exceptions particularly if you have a formal court order or binding financial agreement in place that assigns the mortgage to your former partner but you’ll need to discuss this with a broker to understand how individual lenders view these situations.
If you’re looking to borrow independently and carrying a joint mortgage is holding you back, resolving the property split sooner rather than later is usually in your financial interest.
What About Redraw Funds or Offset Accounts?
If your joint mortgage has an offset account or a redraw facility with accumulated funds, both parties typically have access to those funds. In a separation, it’s not unusual for one party to draw down or withdraw those funds sometimes unexpectedly.
If you have a joint home loan with savings held in an offset account, it’s worth taking stock of what’s there and understanding your options for protecting those funds during the separation process. A financial agreement or consent orders can help establish what happens to these balances.
What If You’re a First Home Buyer Now Entering the Market Post-Separation?
Separation sometimes means one partner had never previously owned property in their own name. In some cases, this person may now qualify for first home buyer concessions or grants they weren’t eligible for previously.
If this describes your situation, our team can help you understand what might be available, including through schemes like Keystart Home Loans and the WA First Home Owner Grant. These are not available to everyone, but they can make a material difference for those who do qualify.
Getting a Guarantor When Borrowing Alone
If your single income makes it difficult to borrow enough to buy out your former partner or purchase independently, a guarantor or family assist loan might be worth exploring. This is where a family member (often a parent) uses the equity in their own property to support your borrowing application.
This type of arrangement comes with its own considerations and risks for the guarantor, so it’s not something to enter into lightly but it can open doors for people whose income alone won’t support the borrowing they need.
The Role of a Mortgage Broker in a Separation
Navigating a mortgage during a separation is rarely straightforward, and trying to do it without proper guidance can lead to costly mistakes. A mortgage broker can help you understand your current position, what your options are given your income and the existing loan, and how different decisions will affect your ability to borrow in the future.
At Central Lending Solutions, we deal with these situations with discretion and without judgment. We can help you compare lenders, run the numbers on your options, and make sure you understand the full financial picture before making decisions that will have long-term consequences.
It’s also worth considering mortgage protection insurance as you move into a new financial chapter on your own, particularly if you’ll be the sole borrower on a property for the first time.
Working With Other Professionals
Your mortgage broker is one part of the team you’ll need during a separation that involves property. You should also be working with a family lawyer to understand your rights and obligations, and potentially a financial adviser or accountant depending on the complexity of your assets.
The legal and financial sides of a separation don’t always move at the same pace, and decisions made without coordinating these professionals can create problems. Getting everyone on the same page early makes a significant difference.
FAQs
Can I force my former partner to sell the property if they won’t agree?
This is a legal question best directed to a family lawyer. In general, if an agreement can’t be reached voluntarily, the Family Court can make orders regarding the division of property including orders for a property to be sold. The process can take time, which is why reaching an agreement early is usually preferable.
My ex stopped paying their share of the mortgage. What should I do?
Contact your lender immediately. Explain the situation and ask about hardship provisions or options for restructuring repayments. You should also consider seeking legal advice about recovering those payments from your former partner. Allowing the loan to fall into arrears will damage both your credit files and could lead to default proceedings.
If my name is removed from the mortgage, does that mean I’m no longer liable for it?
Yes, once your name is formally removed by the lender (not just by a private agreement with your ex-partner), you are no longer legally responsible for that debt. However, this requires lender approval and typically means the remaining borrower has qualified to service the loan on their own.
How long does it take to transfer a property into one name after separation?
The timeframe depends on how quickly the financial settlement is reached (by agreement or court order), the complexity of the lender’s assessment process, and whether a refinance is required. It can range from a few months to well over a year in contested situations. Using our loan comparison calculator during this period can help you plan your next steps.
What if the property is worth less than we owe?
Negative equity makes separation significantly more complicated. Selling may result in neither party receiving any proceeds, and both may still owe the lender the shortfall. In this situation, you’ll need to work closely with your lender, your lawyer, and potentially a financial counsellor to understand your options. Speaking with a mortgage broker early can help clarify what’s possible.
We’re Here to Help Without Judgment
Separation is hard enough without your finances becoming an added source of confusion and anxiety. At Central Lending Solutions, we work with clients in all kinds of circumstances including those going through a relationship breakdown and we approach every conversation with care and respect.
If you need to understand your options, restructure an existing loan, or borrow independently for the first time, our team is here to help you find the right path forward. We compare home loan options across a wide range of lenders, and our service costs you nothing.
Contact us today for a confidential conversation we’re happy to meet in person, over the phone, or online at a time that suits you.
0489 082 257 | info@centrallendingsolutions.com.au
What the New Tax Changes Mean If You Own (or Want) an Investment Property
How Much Can You Really Borrow in Perth Right Now?
Should You Fix Your Home Loan Now That Rates Are Climbing?
Your Fixed Rate Is About to End. Here’s What to Do Next
We’re Here to Help
Contact our team if you have questions about home loans, refinancing, or other lending options. Call us, book a time to speak, or send us an email and we will get back to you.
0489 082 257
info@centrallendingsolutions.com.au
Central Lending Solutions is a Perth-based mortgage brokerage with over 20 years of experience in the finance industry. Our team helps clients compare lenders and navigate the home loan process from enquiry through to approval.
