- In divorce proceedings, the solicitor registers a notice against both spouses’ properties. Unless both sides sign a consent, the property cannot be sold, remortgaged, further mortgaged or let.
- A bank will not lend against a property transferred by deed of gift. But where there is a court order, a bank can arrange a mortgage on a property the court awards to the wife.
- For a property held as tenants in common or as joint tenants, once you have agreed between yourselves, the bank will accept a mortgage only if the husband sells his share to the wife.
- A property received before the divorce still counts as a transfer between close relatives and can be sold within 3 years without being subject to Special Stamp Duty (SSD).
“Marriage is easy, divorce is hard.” The questions a divorce brings, such as custody, maintenance and the division of property, are no easier to settle than the emotional split.
What should you do if you still hold a mortgaged property when you apply for divorce?
How property is divided in the divorce process
The best outcome is of course for the couple to negotiate a result both can accept. If you cannot reach an agreement on the division of property, the court must divide it.
| Matrimonial home | Investment property | |
|---|---|---|
| How the court usually divides it | Awarded to the parent who has custody of the children | Equal division |
| In a typical divorce, the couple would | Transfer ownership and take out a new mortgage | Sell and divide the proceeds |
The court’s final division has to be settled through legal proceedings.
More tips on the divorce procedure:
- How do I apply for a divorce?
- Divorce mediation in Hong Kong: the process and its benefits
- Why hire a solicitor for your divorce: the benefits and why it matters
Cannot agree on dividing the property?
Get in touch, and a dedicated consultant will first understand your situation.
A property cannot be remortgaged or further mortgaged during the court case
When a couple decide to divorce and legal proceedings are needed, the solicitor registers a notice against every property the two of you own, so the property cannot be remortgaged or further mortgaged.
A land search will show “Certified True Copy of Notice of Intention to Proceed with An Application for Ancillary Relief”.
Once the notice is registered, unless both sides sign a consent, the property cannot be used for the following transactions:
- Sale
- Further mortgage
- Remortgage
- Letting and similar transactions
Once the bank knows, it will not press you to repay. You simply keep paying on time.
How property held in one name is divided
If the property is still mortgaged, the spouse who takes it over after the divorce takes on the loan, so it is very important to check whether they can afford the mortgage.
If the property was the husband’s matrimonial home and is still mortgaged, and the couple transfer it to the wife by “deed of gift”, it will be very hard for her to take on the mortgage.
Please note
- Under the Bankruptcy Ordinance (Cap. 6), within five years after a bankruptcy the court can set aside a gift made by the bankrupt, and the Official Receiver can take over the property. This is why a bank will not lend against a property transferred by “deed of gift”.
To avoid this, you can consider putting the property in the wife’s name before the divorce as a transfer between close relatives, at the market price or close to it.
If the person receiving it can show enough ability to repay, banks will generally approve the mortgage.
If the matrimonial home was the husband’s and the court awards it to the wife after the divorce, it is also transferred to her as a “deed of gift”. But because there is a court order, the bank can arrange a mortgage.
With a court order, even if the husband goes bankrupt, the Official Receiver cannot take the property back on the ground that it was a “deed of gift”.
Property held in the wife’s sole name
Another case is a wife who holds the property in her sole name but whose income was not enough, so the husband acted as guarantor. After the divorce the property is still hers, but the husband is no longer its guarantor.
If the wife wants to keep paying the mortgage, the bank will reassess whether she can afford the rest of the loan, and may ask for proof of income.
Please note
- If her income is not enough, or she has none, the bank may ask her to find another guarantor or to repay part of the loan.
Joint property: tenants in common or joint tenants, and court-ordered transfers
If a couple hold property as “tenants in common” or “joint tenants”, they can agree between themselves that the husband transfers his interest to the wife, so she becomes the sole owner.
The bank will want both sides to deal clearly with the property interests. It will accept a mortgage only if the husband sells to the wife, not if he gives it to her by “deed of gift”.
The bank will also check whether the wife can afford the repayments.
A transfer ordered by the court
If the court requires one party (X) to transfer property to the other (Y), this is not a transfer at the normal market price, but some banks will still grant a mortgage because the court has required it.
However, some banks are more cautious and will lend only after five years or more.
Not sure whether a mortgage will be approved after a joint property is transferred?
Feel free to check your situation with us.
The receiving spouse cannot afford the payments
If the receiving spouse cannot afford the payments, they can choose to sell the property for cash after receiving it.
A property received before the divorce still counts as a transfer between close relatives and can be sold within 3 years without being subject to Special Stamp Duty (SSD).
If the court decides to transfer the property from one spouse to the other, the transfer is not subject to SSD, and once they have the property they can also sell it straight away without paying SSD.
Is there 15% stamp duty on a second property?
Suppose the husband transfers the matrimonial home to the wife, and she already owns another property. Because there is a court order, the old stamp duty rates can be used, and SSD is also waived.
For the old stamp duty table, click this link (use Table 2).
Can the old stamp duty rates apply to a second property?
If in doubt, feel free to contact our dedicated consultants.
