Getting a mortgage and remortgaging the family home when getting divorced can seem complicated particularly if you don’t know how much you might be able to borrow. But if you understand what the lenders are looking for, it can be fairly straightforward as Jeni explains.
One of the most unsettling factors of divorce is sorting out the finances and future living arrangements. Generally speaking, there are two main scenarios which come with a divorce:
1. One person stays in the family home and takes a mortgage on by themselves
2. One person looks to buy a new home whilst continuing to make a financial contribution to the other person and/or their children.
Buying out the other person:
Buying out your former spouse so that you can stay in the family home is very common particularly where children are factored into the equation. Whilst the process can be fairly straightforward, you will need to remortgage. You cannot simply remove your ex-spouse’s name from the existing mortgage (and title deeds).
If you are in this position, it’s worth knowing that lenders will consider a mixture of income sources which includes but is not limited to:
• Working tax credits/child tax credits
• Child benefit
The very good news is that most lenders recognise these different types of income as something which can be relied upon and will thus be regarded as ‘traditional income’ when looking at how much they will lend. Generally speaking, these days, lenders will go up to 4.5 x income.
Buying a new home whilst making financial contributions to the other party:
If you are buying a new home, most likely you will have to wait until your former spouse has remortgaged it so that you are released from the original mortgage. Your name will also need to be removed from the title deeds of the former family home.
When applying for a mortgage on the new home, lenders will look at your annual income, then deduct your financial commitments and the net figure is the one which they will use to calculate how much they can lend - usually 4.5 x the net figure as a general rule of thumb.
Still on the mortgage on the family home?
If you still need to be party to the mortgage on the family home but are not actually making the monthly payments, you are still liable for the whole debt.
In this scenario, when assessing how much to lend, lenders will deduct the monthly mortgage payment due on the family home from your income, as well as any maintenance support you may be paying.
Everyone’s circumstances are different so it would be impossible to cover every possible scenario here; however, our brokers are always happy to have a conversation, without charge or obligation, to offer advice on your options.
Call the main number on 0345 345 6788.
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