Who pays the mortgage after separation in Australia?

Mortgage payments are a significant challenge that many couples face when divorcing or separating and often requires professional legal and financial advice.

As far as the law is concerned, the person in whose name the mortgage is registered is legally liable for the monthly payments. If the mortgage is registered in both names, you are both legally responsible to continue meeting the payments until the property is sold (or transferred to one or other party).

Does one person have to move out of the house when you separate?

The quick answer is “no”: there is no legal obligation for a party to depart unless ordered by a Court to do so. But usually, one party does move out on separation.  

The family law in Australian recognises that sometimes it’s not financially possible for a separated couple to afford two dwellings and accepts that both parties may be separated but still live in the same home. This is called separation under one roof.

If I move out, do I still have to pay the mortgage?

If you are one of the mortgagors you are still legally liable to pay the mortgage after you separate even if you have moved out.

If I move out, do I lose any rights to the house?

You do not lose legal rights to ownership of your property simply because you are not living there. And you are still be entitled to have the property included in any financial distribution. 

What happens if my ex doesn’t pay their share of the mortgage?

If a party refuses to contribute to the mortgage you may find yourself in a precarious position as payments must be made or your bank might seek to sell the property.

In these circumstances, you might pay the full mortgage and seek that this be taken into account in your final financial settlement or request the Family Court order your ex to pay. But beware, where a party is solely occupying a property the Family Court might conclude that it is inappropriate for the other party to continue to pay a share of the mortgage.

Can I be forced to move out of the family home?

If you are on the title of a property, you cannot be forced to move out unless by Court Order.

If you cannot afford to pay your share of the mortgage and your ex is in a financial position to do so, the Family Court might order them to continue paying the mortgage until property settlement is finalised.

How to deal with joint liability for a mortgage after separation?

There is no simple way of dealing with joint liabilities and most couples make their own arrangements that suit their particular circumstances.

There might be several options:

  • one person buys the other person’s share in a financial settlement and continues to live in the home. This will involve discharging the existing mortgage and refinancing the property in the retaining party’s sole name;
  • the home is sold and the net proceeds go into the net asset pool for distribution in the property settlement;
  • the parties continue to live “separated under one roof” and share the mortgage payments as they choose. This is usually a temporary measure and sooner or later a permanent solution (i.e. a final financial settlement) will have to occur.

Can we be forced to sell our family home after we separate?

If the monthly repayments cannot be met and you’re unable to reach a just and equitable property settlement, you may have no other choice than to sell your home after you have separated.

The net proceeds after deduction of sale costs and commissions and discharge of the existing mortgage will go into the pool of net assets to be divided in the overall property settlement.  

Hopefully that answers your questions around who pays the mortgage after separation in Australia.

Ready to move on and start building your new life? Get in touch with accredited family mediator Ian Shann at Move On Mediation in Perth today.