Getting a Divorce and a Mortgage – What You Need to Know
Divorce brings stress, uncertainty, and plenty of paperwork—and that’s before anyone starts talking about who keeps the air fryer. If you’re navigating a separation and wondering what it means for your mortgage or future property plans, you’re not alone. Many Kiwis face this challenge, and while it may feel overwhelming, there is a path forward.
Let’s break down the key steps in managing a mortgage during or after a separation.
Have the Hard Conversations Early
For those still happily coupled: now is the time to talk about what would happen if things changed. When you purchase property with a partner, make clear decisions about financial contributions, ownership shares, and what would happen in the event of a split.
If one person is contributing more—whether from savings or help from family—document it. A lawyer can formalise this with a relationship property agreement. These agreements aren’t a sign of doubt in your relationship; they’re simply good financial hygiene.
Buying Your Ex Out of the Family Home
One common scenario is one partner buying the other out of the family home. There are two routes for this:
Take over the existing mortgage
Apply for a new mortgage in your own name
Your mortgage adviser will help determine which approach suits your circumstances best.
To proceed, the bank needs several pieces of information, including:
1. The Purchase Price
This is usually based on a registered valuation. Importantly, the valuation must be ordered through the bank’s approved ordering system. If you obtain a valuation directly, the bank is unlikely to accept it, and you’ll need to pay for another.
If there’s disagreement about the valuation, either party can order a second report. When two valuations differ significantly, it’s common to average them out. However, only the valuation with the purchaser’s name on it can be used for mortgage approval. Any discrepancies will need to be explained to the bank.
Once a purchase price is agreed, it should be recorded in a formal separation agreement, with both parties receiving independent legal advice. This ensures the bank is confident in the arrangement and allows the mortgage to proceed.
2. Child Custody and Financial Obligations
If children are involved, the bank will need to know:
Ongoing care arrangements
Child support obligations
Daycare, after-school care, or other related costs
Any reduction in income due to care responsibilities
Even if the separation is amicable, a written record of custody arrangements and expenses is usually required by the bank to verify long-term financial stability.
What About Tax?
In most cases, property transfers made under a relationship property agreement are exempt from tax. However, if the property is transferred into a trust, or turned into a rental or holiday home, the bright-line test or other tax rules may apply.
It’s important to get early advice from both a lawyer and an accountant to understand whether you’ll have any tax liabilities and to ensure your mortgage covers all related costs.
Buying a New Home During Your Divorce
Yes, you can get mortgage pre-approval during a separation, but there are some added layers. You’ll still need to prove:
Income
Deposit or equity
Ongoing expenses
But the bank may also require:
A signed separation agreement
Evidence of asset division (such as sale of the family home)
Confirmation of childcare arrangements and costs
Pre-approval can be based on expected equity from a property settlement, but the bank won’t finalise lending until the settlement is complete and the funds are available.
Speak to a Mortgage Adviser Early
Divorce and separation are emotional and exhausting, but getting early advice can help you avoid costly mistakes. Rather than relying on hearsay or guesswork, speak to a mortgage broker who can map out your options clearly and help you prepare the right documentation.
For more support, Sorted.org.nz has excellent financial resources for those going through a separation.
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