A Broker’s Guide to Financing Divorce Buyouts and Protecting Credit Scores
Divorce rates remain high, and the financial disentanglement of a household is one of the most complex transactions a broker will encounter. In the current market, with property prices high and interest rates elevated, the "buyout"—one partner keeping the home—has become increasingly difficult due to serviceability buffers.
We are seeing the rise of a new demographic: "Mortgage Prisoners". These are clients who can afford the repayments on paper but are unable to refinance the family home into a single name due to bank policy. This guide provides the framework you need to navigate these sensitive files.
The "divorce niche" is highly lucrative but technically demanding. The primary hurdle is the sheer drop in borrowing capacity when moving from two incomes to one, compounded by the 3% serviceability buffer.
Fig 1: The gap between standard policy and actual affordability.
Both parties are 100% liable for the debt until it is refinanced. If one party stops paying out of spite, both credit scores are destroyed, rendering future borrowing impossible. Brokers must advise clients to maintain perfect repayment history during the separation phase.
A vital first step in asset protection is the credit file check. Brokers should encourage clients to check their credit files immediately upon separation. This ensures no rogue debts are being accrued by the ex-partner and provides a baseline for the buyout strategy.
Refinancing from two incomes to one often fails the standard serviceability assessment. However, specific lenders (often non-banks) have more flexible policies designed for this exact scenario.
One of the most common mistakes brokers make is submitting an application before the legal framework is in place. You must often wait for the Binding Financial Agreement (BFA) or Court Order.
This document is essential for:
These clients are often traumatized. The broker’s role extends beyond finance; you act as a project manager for their financial separation. Providing certainty, clear timelines, and calm communication is as valuable as the interest rate you secure.
The "Separation Tsunami" represents a significant opportunity for brokers who can master the technical nuances of BFA-supported lending. By moving beyond the major banks and understanding niche policy, you can turn a "decline" into a settled home for a fresh start.