QLD Property Settlement - What Happens if You Can't Refinance the Mortgage?

[AndyG]

My question relates to how a house asset gets divided when separating assets in property settlement:

My sister is separating from her husband (not yet getting divorced) and in principle, he has said that she can basically have the house, but I don't understand how that works. I'm guessing it involves refinancing the mortgage with the bank. But here's the catch - I don't think the bank will agree to refinance the mortgage and put it in my sister's name because she is a single mum with 5 kids, a bad credit history and a relatively meagre income. How can this work out?

Does she have to sell the house in order to complete the separation? And if so, then that sucks because she's probably unlikely to even be able to find a rental property to live in because of the credit history and so on.

Or (unlikely) can the court order a bank to transfer a mortgage to her? That seems impossible.

Basically, I'm wondering how can this work out, how does property settlement work when neither party can refinance the mortgage on the family house?

 

[Rod]

In situations like this assets are sold and proceeds divided up by the court.

Bad credit is something your sister needs to live with until she gets her act together and starts to manage her finances. Bad credit can be repaired but it needs effort and time. If a person can't stop spending they have to wear the consequences of their actions.

If she is the type of person who can't manage her spending then cut up the credit cards and only use debit cards.

 

[AndyG]

Thanks Rod. The bad credit rating came from a series of unfortunate events, not all of which were her fault. I don't think the bad credit thing is insurmountable though.

I think that the sale of the house is the best way to go so long as the ex husband is agreeable to allowing the money left over after the mortgage is paid to go to my sisters bank account for her to use to buy/build a new home. All we should technically need is the cooperation of the ex husband to get that money from the sale of the house, and then beg a bank to lend some money.

So there are no other hurdles other than those right?

 

[Timnuts]

After the sale of property is finalised, all debt and liabilities are payed out. If there is money that is left over, the equity is then spit between the two parties.

 

[Simon Pattison]

Hi Andy,

Unfortunately if your sister can't manage the mortgage and there are no other funds then it is likely she will have to sell the property.

If your sister and her husband are in agreement to her "receiving" the house then she should document that. Once that occurs the house can be sold and pursuant to the agreement she can receive the equity that is left.

It is dangerous to proceed without documenting the agreement as her husband could renege on what he has said at the last minute and claim some of the proceeds of sale.