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Mothers-in-law, infuriating tangles of fairy lights, Christmas puddings that set the dining room on fire. It’s little wonder that January is the peak season for divorces, with the first working Monday of the new year typically bringing a flood of new business for solicitors. 2016 has been no different. Spending an extended period at home with the family has, as usual, generated a huge spike in the number of couples filing for divorce.
It is often said that a mortgage is a more serious undertaking than a marriage; they can certainly be harder to get out of. Trying to disentangle oneself from a joint mortgage, or applying for a new loan in the aftermath of a divorce, is one of the most stressful elements of a difficult process. The expense incurred can leave one or more parties in financial straits, making financing near impossible to come by.
2016, however, has started with some very encouraging news for anyone whose marriage fell victim to a festive bust-up: Ipswich Building Society (IBS) has announced that all of its residential mortgages are to become available to recent divorcees.
Historically, divorced single parents have struggled to qualify for a loan because some lenders – such as Coventry Building Society – don’t accept maintenance payments as a source of income at all. Others – like Santander – will count 50% of the payments when calculating total income. These lenders generally also require a solicitor’s letter of confirmation, and bank statements showing a strong track record of regular payments being made.
As part of IBS’s promise to take care of those ‘overlooked’ by other lenders, more gentle and flexible affordability checks will be introduced for those receiving child support. To be eligible for these divorce mortgages, you must be working full or part time, and the maintenance payments must be supported by a court order or the Child Support Agency (CSA) – and have at least five years left to run. If you can tick these boxes, 100% of the child support you receive will be taken into account when assessing affordability.
IBS’s pronouncement will therefore be a huge boost for any single parent who needs those maintenance payments to be taken into account to secure a loan.
On the other side of the fence, those paying child maintenance can also find that their financing options become severely limited. Even if they will not take received payments into account when assessing affordability, lenders will generally count them as an outgoing and deduct them from the income of the payer. Divorce mortgages, it is hoped, will take a more sympathetic view of both the payer and payee’s financial picture.
Of course, a financial commitment that was once a joint undertaking is the last thing you want to think about – or prioritise – in the aftermath of a divorce. But if the original mortgage falls into arrears, both parties will suffer. Their credit ratings will plummet, impacting their prospects of either moving the property into one name or securing finance to buy a new property in the future. It is therefore incredibly important to stay on top of payments – and lenders are finally waking up to the particular needs of this demographic.
If you have been left in a tricky financial situation by a divorce, or have any questions about this article, please do get in touch. We have a lot of experience dealing with divorce mortgages, and our specialist brokers are on hand to talk through your options with you day and night.