If you are going through divorce and questions affecting your future housing and mortgage needs are being discussed it is likely your legal representative will ask you to find out your mortgage capacity.
It might be easy for you to have a quick search on-line or have a chat with your existing lender; however, it is vital you get accurate information. Without it you could find yourself in difficulty post divorce:
High State Benefits & Maintenance – Upon separation many people find that they are entitled to claim benefits such as Working and/or Family Tax Credits. Although this income is often a welcome requirement it can lead to problems when applying for a mortgage. Providers are not keen on lending to those who rely heavily on State Benefits or Maintenance income. They prefer to base lending decisions on earned income and if 50% or more of your income derives from other sources your mortgage application is likely to be declined.
Second Mortgages – In the event that one party to divorce is unable to get a mortgage or borrow enough to move home, negotiations are sometimes made to ensure that they remain in the former marital home. This then leave’s the other divorcee unable to release themselves from the mortgage. It is important to understand that although the remaining divorcee may no longer live in the property they are still responsible for it. Any application to purchase themselves a new home will be affected by the remaining mortgage payments.
Adult Children – With the average age of First Time Buyers now being in their 30’s it is likely that adult children will be living at home with their parents for a lot longer. With this in mind Mortgage Lenders have started to deduct income from applicants who have adult children living with them. Any housekeeping money paid by the children will not be taken into account when assessing affordability.
Credit History – It might be tempting to stop paying for any joint commitments when going through separation. However, it is important to note that this will affect your credit record and Mortgage Lenders are likely to decline you should you have any recent missed or late payments. Furthermore if these missed payments continue and result in a CCJ, your chances of getting a mortgage could be ruined for years to come.
There are lots of unusual lending criteria ready to trip you up during the divorce process and as you may not be 100% sure of what your circumstances will be post divorce, they can be difficult to predict. Making sure you get quality, accurate and enduring advice from an expert will ensure you are as informed as possible.