November 2017
CASE STUDY:
Purchasing Property after Divorce
One of our clients recently purchased a home after her divorce. For many people this can be a difficult time and process, so she was kind enough to share her story….
Were you always responsible for finance decisions when you were married, or did you manage these affairs together?
I had always been heavily involved in financial decisions and although I didn’t own property when we married, I did have my own money.
Have you ever borrowed in your own name?
No, we bought our first home in 2006 and had lived overseas for several years prior to that, but rented there.
How long did it take you to find a property?
I had been keeping an eye on the market since 2015, but was not in a position to buy until I was 95% sure my divorce settlement would be finalised by a certain date. I started looking seriously in April this year, and purchased in October.
What were some of the practicalities you needed to consider when looking for a property?
I had been renting in the northern suburbs and the kids had settled into schools there so I was cognisant of not making another move, especially for the younger children. The location of the new house I have purchased means they can remain at the same school.
WOMEN GET FRANK ABOUT FINANCE:
MLC RESEARCH REVEALS WOMEN FEEL IN CONTROL BUT ARE UNPREPARED
You needed settlement proceeds to make this purchase. Would it have been possible without?
Yes, that’s correct. We owned our marital home outright and 2 investment properties. We sold that property in advance which meant I didn’t have to co-ordinate the sale of that with the purchase of another and those proceeds were to be the most part of my divorce settlement. That arrangement certainly assisted my circumstances.
What are some of the issues women or men need to be mindful of when applying for finance after a divorce?
You need to make sure you are removed from any of your ex-partners debts or loans as soon as possible. Also, if you are in a complicated financial set up like a Company or Trust, make sure you are removed from those too. Even though I was not contributing to the loans on the investment properties, I was still on the loan which meant a lender would consider me liable. I had consent orders to be removed from those loans, but this didn’t happen until 17/10 and I bought the property on 10/10. There is no doubt that part of the process when buying a home at this time is mitigating risk, and sometimes it can run close to the wire!
Did you find the loan process relatively straight forward?
Yes, it was really good. I couldn’t borrow as much as I wanted because the lender did not take into account child support (because my ex lives overseas) which I thought they would. I was paying $920 pw rent so a huge amount of child support effectively goes to rent, so it was a surprise that it would not be considered as income for a mortgage.
Do you think using a broker helped you navigate the process? Would you recommend recently separated/divorced people use this service to help, especially those who have very little financial experience?
Yes, definitely. It is too risky going to a bank as they think you are only interested in a rate!
Can I confirm the features you were after in the loan you were after:
- Make unlimited extra payments without penalty
- One with 2 offset accounts
- No extra charge for early repayment
Have you got this wishlist with your loan?
Yes, I believe I have.
How did you hear about The Property Education Company & Louise?
My partner uses the services of Leah Supple from Supplementary Complete Accounting and she recommended Louise. I will be using her accounting services soon too.
Final comment:
Even if you think your marriage will last forever, please try to have some money of your own in a separate account. My separation started at the beginning of 2014 and I have only recently divorced so that can be a long time to have very little access to funds!
Quote of the Day:
“I must say I hate money, but it’s the lack of it I hate the most”
— Katherine Mansfield