Divorce Settlement Bridging Loans

A divorce settlement bridging loan is short-term finance secured on property, used to meet a financial settlement on time — such as buying out a former partner's share of the home or paying a lump sum — and repaid later by a remortgage or sale.

A bridging loan is used when a settlement must be paid before a sole-name remortgage or property sale can complete, for example to buy out a former partner by a court deadline or to fund a new home before the family home sells.

You can use a bridging loan to buy out a former partner, repaying the joint mortgage and paying their share, with the property transferred into your name. The bridge is then repaid by a sole-name remortgage that must be affordable on your income.

A divorce bridging loan secured on a home that you or a related person live in is regulated by the Financial Conduct Authority (FCA), and the lender must be satisfied that you have a credible repayment strategy. Bridging on investment property is usually unregulated.

The amount depends on the property's value, the lender's maximum loan-to-value and the exit. With a remortgage exit, the bridge should not exceed what a sole-name mortgage can repay on your income, including fees and interest.

Lenders usually want a sealed consent order or a settlement agreed through solicitors before releasing funds, so the payment and the transfer of the property are legally documented. Some will issue terms in advance to fit the timetable.

A consent order is a court order recording the financial settlement agreed between divorcing spouses or separating civil partners, making it legally binding. Lenders and conveyancers rely on it to confirm the payment and the property transfer.

In England and Wales, under the no-fault divorce rules in force from 6 April 2022, the final order replaced the decree absolute, and the conditional order replaced the decree nisi. Financial orders are usually made alongside, often as consent orders.

A bridging loan can fund a lump sum ordered in a financial settlement, secured on a property that will be sold or remortgaged to repay it. The lender needs evidence of the exit and the timetable.

A bridging loan can fund a new home before the family home sells, for example for the parent with children, secured on the new property and sometimes the family home. The family home's sale repays the bridge.

If a sole-name remortgage cannot repay the bridge, options include a smaller buy-out, adding a joint borrower who does not own the home, using maintenance income where lenders accept it, or a sale exit. These are tested before taking the bridge.

Some lenders count spousal or child maintenance as income for a mortgage where it is set by a court order or formal agreement and has been received regularly. Lender policies vary on how much they count.

Where the existing lender agrees to a transfer of equity into one name, the existing mortgage can sometimes continue, with a second-charge bridge funding the buy-out. The lender assesses the remaining borrower's affordability.

A pension sharing order usually transfers pension rights rather than cash, so it rarely provides funds to repay a bridge. Pension commencement lump sums can be taken only within pension rules, so lenders seldom accept them as an exit.

A divorce bridging loan can complete in a few weeks once the order or settlement is agreed, the valuation is done and the solicitors have dealt with the title and the former partner's removal. Starting early avoids missing the deadline.

Usually the partner keeping the property takes the bridge and pays its costs, though the settlement may reflect them. Your family solicitor advises on how the costs are dealt with in the settlement.

Bridging lenders focus on the security and exit, so adverse credit is considered case by case. The sole-name remortgage exit must also accept the credit history, which is checked before the bridge is arranged.

If the exit fails, the options are an extension, re-bridging or selling the property. Because a divorce bridge is usually secured on your home, the lender can ultimately repossess, which is why the exit is tested first.

A second charge loan can fund a buy-out over a longer term while keeping the existing mortgage, which suits borrowers who can afford monthly payments. A bridge can suit a purchase when a remortgage or sale will follow within months.

You need your own family solicitor for the settlement and a conveyancer for the property transfer and bridge. A former partner being removed from the title also takes their own legal advice.