Mortgages after a separation or divorce

A separation requires a decision about the home. One person needs to buy the other out, or a new home has to be found, and the borrowing has to be arranged under pressure and often at short notice. That mortgage can be the first practical step a separating client takes.

The couple’s finances also have to be divided into two. Pensions form part of the settlement, protection written for a couple may no longer fit, and wills and beneficiary nominations may name the former partner. You arrange the lending, and E&G gives the regulated advice on the rest, at a pace that suits the client.

Separation mortgage cases

Two kinds of case come up. In the first, one partner stays in the family home and raises a mortgage to buy out the other’s share, usually through a transfer of equity. In the second, one partner leaves and needs a new mortgage on a smaller place, sometimes on a single income for the first time in years. Affordability changes in both. A mortgage that was comfortable for two can be a stretch for one, and the affordability has to be worked out carefully.

This is ordinary work for you, during a hard time for the client. You may be the first professional they speak to who is looking at the practical question of where they are going to live and how they are going to pay for it.

Taking care with the client

The client may be going through a difficult time. The first job is the mortgage they came for, done well and without adding pressure. A wider conversation about pensions, protection or wills can come later, once the client is ready.

The right time is normally once the lending is settled and the client can think past the next few weeks. If that moment never comes, leave it, and the mortgage, which is what they asked for, is still done. Do not offer an introduction at a moment when it would add to the client’s distress.

The lending and the protection stay with you

Under your own permissions you arrange the mortgage and you can advise on the protection that sits around it. In a separation both matter more than usual. A client moving onto a single income needs the borrowing structured realistically. The life cover, income protection and critical illness cover that were arranged for a couple usually have to be looked at again, because the person the cover was meant to protect and the debt it was meant to repay have both changed.

That protection work is yours to do. E&G advises on the wider financial planning around it.

The pension in a separation

Outside the family home, a pension can be the biggest thing a separating couple owns, and sometimes it is valued at more than the house. How it is dealt with in a settlement is a technical question with consequences that run for the rest of both people’s lives. A pension can be shared by order, offset against other assets so that one partner keeps more of the house in exchange for less of the pension, or left with an attachment to be paid later. Each route leaves the two people in a different position at retirement.

This is regulated advice, and it is E&G’s to give, working alongside the client’s solicitor. You must not advise a client on whether to trade a share of a pension for the home, or on how a pension should be split. What you can do is point out that the pension is part of the settlement and may be the largest asset after the property, and introduce them to a firm authorised to advise on it.

Reviewing protection and nominations

Cover arranged for the couple may no longer fit. Joint life policies were built around two incomes and a shared home. Beneficiary nominations on pensions and any death-in-service cover often still name a former partner, sometimes for years after the split. Expression-of-wish forms may also name the former partner.

Some of this is protection you can arrange under your own permissions, and in a separation it usually needs redoing so that a single-income household with children is covered. The wider questions of who should now benefit, and how the cover fits a rebuilt financial plan, are E&G’s regulated advice. All of it should be reviewed before it is needed.

The will and the estate

A will written during the relationship usually leaves everything to the former partner, and separation on its own does not change that. Until a divorce is finalised the old will still stands as written, and the rules that apply once it is finalised are narrow and easy to misread, so a client should not assume the divorce has updated their will.

Reviewing and rewriting a will, and dealing with the estate that a separation reshapes, is work for E&G and its professional connections. You may be the first person in a position to notice that it needs doing, because the mortgage puts the client’s whole position in front of you at the point it has changed.

Two households from one

What was shared is now divided or duplicated. Savings are split. A single income covers what two used to. Budgeting starts again from a different base. Some clients come out of a long relationship having never managed the investments or the pension themselves, and now have to.

E&G’s role here is to help rebuild a plan for one person where there used to be a plan for two, at a pace the client can manage.

Where the regulatory line sits

The boundary is the same one that runs through everything you do with E&G. You can advise on the mortgage and on the protection that sits around it. You must not advise on how a pension is divided, on what to do with a settlement, or on restructuring an estate. Those are regulated advice, and E&G gives them.

Raising the subject and making an introduction is within what you are permitted to do. Telling a client what to accept in a financial settlement is not, and the responsibility for that advice sits with E&G.

How the introduction works in a separation

With the client’s consent, and once the timing is right, you make a short warm introduction to E&G. Only what the client has agreed to is shared, and their affordability file and paperwork are not handed over as a matter of routine. E&G makes contact with the same care and takes the regulated advice from there.

You stay in view through the partner portal and can see where the introduction has reached without chasing anyone. If the client would rather wait until the divorce is further along, the introduction waits until they are ready.

Why a joined-up approach helps the client

A separating client is dealing with a solicitor, a lender and their own upended finances at once, usually while looking after children and holding down a job. Bringing the mortgage and the regulated financial advice into one coordinated relationship means fewer new people to brief and less risk of something being missed.

The value to your firm follows from having served the client well at a hard moment, and it recurs as the new advice relationship continues.

Questions brokers ask

Is a separation the right time to bring up financial advice?

Only when it is handled with care. The mortgage is the job the client came for, and it comes first. A wider conversation about pensions, protection and wills belongs after the lending is settled, when the client can think past the immediate weeks. It is offered, and the client decides. If the moment never comes, it is left.

Can I advise a client on how their pension should be split?

No. How a pension is shared, offset or attached in a divorce is regulated advice with lifelong consequences, and it sits with Equity & General and the client’s solicitor. You can point out that the pension forms part of the settlement and may be the largest asset after the home, and you can introduce them to a firm authorised to advise on it. You must not tell them what to accept.

What am I allowed to do with the protection?

Advising on and arranging life cover, income protection and critical illness cover sits within your permissions, and in a separation it usually needs redoing, because the cover was built for two people and one income now carries the household. The wider planning around beneficiaries, settlements and a rebuilt estate is E&G’s regulated advice. You handle the cover, and we advise on the wider plan.

What if only one of the two people is my client?

Then you act for that person, and consent and confidentiality need particular care. You introduce only your own client, only with their agreement, and only what they authorise is shared. A separation can put two people’s interests in opposition, so the introduction is made for the client in front of you, and E&G advises them on their own position.