During the emotional upheaval of divorce it can be easy to let things slip, but forgetting or refusing to deal with debts and liabilities can have long lasting effects and should never be ignored.
'But I’m not living in the property anymore’ I often deal with clients who have moved out of the family home and either due to ill feeling or because they simple cannot afford to, have stopped meeting the mortgage payments on the family home. Whilst this may satisfy a short term financial need, it is likely to have long term effects.
When applying for a new mortgage many lenders are only willing to accept applicants who have a clear and up-to-date credit history with no missed or late payments on any financial commitment for the previous 6-12 months. Furthermore, of the mortgage lenders who are happy to tolerate some adverse credit a maximum number of missed mortgage payments or arrears, often 3 consecutive months, are usually allowed. This means that if the applicant has missed 3 or more mortgage payments lenders may not consider them for mortgage borrowing for some time.
Arrangements to Pay or Debt Management Plans are usually offered to individuals by their mortgage lenders or other creditors following financial difficulty. Although these arrangements are great for allowing clients to continue paying their mortgage and other debts or repay any arrears at a reduced rate, it is important to understand that the vast majority of mortgage lenders have no appetite for applicants with a DMP/IVA. Anyone who has one of these arrangements in place are likely to experience great difficulty securing new mortgage lending until the agreement has ended.
Defaults, once accrued against a mortgage or other debt, are likely to render the bearer unable to secure mortgage lending for some time. Any default will need to be repaid and show as 'satisfied' on the individuals credit record before being able to apply for lending. Furthermore, a waiting time of at least 12 months from the date the default is satisfied, ensuring all credit commitments are kept up-to-date and paid on time, is likely to be in order before applying for lending. The amount of the default will also be considered and many mortgage lenders will not tolerate large default amounts.
Adverse Specialist Mortgage lenders are mortgage providers who offer lending to individuals with adverse credit such as the issues mentioned above. These lenders are likely to charge higher fees and offer higher interest rates. These lenders will not be found on the High-street.
Ensuring all debts and liabilities are paid on time should be a priority especially for those who are looking to separate. Being unable to obtain mortgage lending could stop a couple from separating financially and the repercussions of these actions should not be overlooked.