Divorce can be one of the most stressful and overwhelming experiences you might ever face. You may have reached a point of financial and personal security in your marriage and divorce can make it feel as though it has all changed. Getting back on track is likely to require financial assistance and for many this comes in the form of a mortgage. But why is it harder for divorcees to get a mortgage?
Your current mortgage is still both your responsibility
If you have a joint mortgage you are both still liable to meet payments. To move the mortgage into one name you will need to get your lender’s approval – you’ll need to demonstrate to them your income is sufficient to afford repayments and that you have adequate security. During divorce couples incur higher levels of outgoings as one household becomes two and there is usually a move from dual household income to single income. With these changes its inevitable that your outgoings will increase, and with that, affordability reduces. It may be that a lender refuses to transfer your mortgage to you or your partner resulting in another ‘outgoing’ that might reduce what a new lender considers you can afford.
Age affects your borrowing capacity
Many couples divorce later in life. Age affects how attractive you are to a lender as your ‘working life’ and the timeframe you are considered able to make repayments is reduced. A lender may only consider a shorter-term mortgage suitable. Shorter mortgages result in lower sums available or higher monthly repayments, both of which can stifle a divorcee’s ability to repurchase.
What lenders consider as ‘income’
If you have children child maintenance may be payable, but it may be that spousal maintenance payments have also been agreed. Sadly, many lenders will not consider maintenance payments as an ‘income source’ when determining what you can afford. Whilst you may be able to afford payments, you’ll be assessed from a worse perspective and may be unable to take out a mortgage.
Similarly, if you have to pay maintenance to your former spouse this would be an outgoing that could substantially reduce what you can afford to repay.
‘Financial ties’
During a divorce, where possible, you may be advised to sever all financial ties from your former spouse. Despite this, you may not realise your former spouse’s financial footprint can follow you even after divorce. Credit agencies may consider who you are ‘financial associated’ with – this includes anyone you may have held a loan, mortgage or any other borrowings with. Your former spouse’s current and past financial struggles can negatively impact a lender’s view your financial stability and could affect your mortgage prospects. It is advisable to apply for ‘financial disassociation’ from your ex through the credit agencies for your ‘financial divorce’.
If you are considering divorce, or have taken the first steps to begin, it is important to seek advice from an experienced solicitor who can advise you of your options. For mortgage advice you should seek assistance from an suitably qualified IFA or mortgage broker. Neither we, nor any other solicitors should be relied upon for specific mortgage advice.
Our family law team has been ranked as the best in Devon and Cornwall by Chambers and The Legal 500, the two leading independent legal guides. Combining sensitivity with sound legal advice, you can rely on us to help you achieve the best possible outcome for your divorce.Our family law team advises families across the South West on the best solutions for them. If you would like to get in touch with the team by telephone 0345 450 5558 or email enquiries@stephens-scown.co.uk