7. High net worth mortgages
With the number of UK properties over £1m growing rapidly, high net worth clients have been demanding better deals and more bespoke products. The marketplace has responded with a range of very selective, interest only mortgages. The criteria are strict, but the saving made can be quite considerable. Again, ask your broker for details, as this can be an option in high net worth cases.
8. No guarantor mortgages
Getting a guarantor for a mortgage after divorce is now no longer possible, for both you and your family. However, that doesn’t mean that joint mortgages are not available after divorce. Instead of a guarantor, you can take out a joint mortgage with a ‘Sponsor’. This must be a blood relative, such as a parent, but cannot be your ex spouse or soon to be ex. This arrangement will allow an individual to be on the mortgage but not live in the property. Mortgages with the Bank of Ireland, for example, state that a Sponsor does not have to be on the title deed, just on the mortgage.
9. Scrutinise your debts and loans, and your regular outgoings
The key criteria for any mortgage lender is that the mortgage needs to be affordable for you as the mortgage holder. Most UK mortgage companies use the Experian credit reference agency, so they can ascertain your credit history regardless of your disclosure.
The types of outgoings that mortgage companies will consider are:
- pay slip outgoings
- loan payments
- HP and CC debts
- child maintenance or spousal maintenance regularly paid
- pension payments
- season ticket loans
- child care vouchers
- school fees and/or nursery costs
The exact criteria for lending does vary according to different lenders. However, no lender likes a client with a regular ‘betting history’ and this kind of behaviour is flagged up to them, with the individual deemed to be high risk. Again, using a broker will establish your affordability thresholds early, so that what you apply for matches your credit information and you are more likely to be accepted. Going direct to a lender each time can result in multiple credit searches and credit scores which can ultimately reduce your credit score. A broker will ensure that this situation does not happen.
10. Tax credits and income
Not every lender takes tax credits into account, and Child Benefit is only paid if you are under the £50k threshold. Others take all of child and spousal maintenance into account, whilst some do not. Income will be taken into consideration whether you are employed or self employed, as will any company car allowance, and bonuses if applicable. Do bear in mind the loss of benefits when children grow older when calculating your income into the future. Don’t overcommit or over-house yourself at all costs, and be prepared to sell when the children fly the nest. With the loss of any income relating to children such as child maintenance payments and tax credits, the mortgage may no longer be affordable once they have left home.
11. Joint and severable liability
If you are on a joint mortgage with your soon-to-be ex, and one of you is awarded the house, it can be hard for the non-resident ex to get another mortgage on a different property. If your name is on any mortgage, you are liable for it whether you live there or not, or pay anything towards the mortgage. The mortgage bestows 100% liability for each named individual, known as ‘joint and severable liability’. If you are in a joint mortgage, and need to take it on as an individual or get your own mortgage, do talk to an advisor first.
Similarly, if you are asked to remain on the mortgage and are offered an indemnity, discuss this first with your family lawyer, as an indemnity is only as good as the person who offers it.
12. Porting a mortgage
This is when you take the mortgage rate and terms with you to buy another property. This is sometimes an available option that can be missed. The other party has to agree to the porting of the mortgage. So, if you have a good rate, make this part of the divorce financial settlement and identify this as a live issue to your solicitor early on
13. Shared ownership
This can be an option if you do not have enough capital to put down as a lump sum or similarly, insufficient income for the full mortgage. It enables you to buy part of your home and rent the remaining share. Often the share that you own can be increased in the future. A good broker can arrange these, but these kind of offers can be few and far between depending on where you live.
Similarly if you are a Key Worker, there can be Key Worker schemes but these are also rare. To be eligible you must work in the public sector and provide a vital, frontline service.
14. Help to Buy Schemes
If you have never owned your own property, the Help to Buy scheme can really help. This is a government-assisted deposit scheme, applicable to selected new build properties. The 2021 scheme now includes three options: a Help to Buy ISA, Shared Ownership and an Equity Loan for new builds. The criteria vary slightly between the schemes.
For the ISA, your property must
- Be located in the UK
- Have a purchase price of up to £250,000 (or up to £450,000 in London)
- Be the only home you will own
- Be where you will be living
- Be purchased using a mortgage
For the Help to Buy: Equity Loan for new built homes (2021-2023):
- You must be a first-time buyer
- The home you buy must be within the relevant regional price cap
- You must not own or have previously owned a home or residential land in the UK or abroad
- You must not have had any form of sharia mortgage finance
The Equity Loan scheme currently allows you to borrow up to a minimum of 5% and up to a maximum of 20% (40% in London) of the full purchase price of a new-build home, when bought from a registered homebuilder. For the first five 5 years, the equity loan is interest free ,and you pay just a £1 monthly management fee by Direct Debit From year 6, you pay the £1 monthly management fee PLUS the monthly interest fee of 1.75% of the equity loan.
For more details, regional caps and a handy calculator, see the Help To Buy website: https://www.helptobuy.gov.uk/equity-loan/equity-loans/
The important thing to remember is that you are not eligible if you’ve already had a property anywhere in the world, including a buy to let property. Often people have gone for a bigger property by using the Help to Buy scheme, but it does need to be timed carefully to work to your full advantage.
15. High Income earners can get a second mortgage
For very high earners, regardless of whether or not they remain on the mortgage of the former matrimonial home, they may be able to obtain a second mortgage.
This is something to consider in traditional marriage set ups, whereby there has been one main and very high earner. The other has been a homemaker, who cannot take over the mortgage perhaps due to having young children and/ or insufficient earnings. Again this is a specialist market where a mortgage broker would be able to help.
Happy to help
If you need help finding your way in the mortgage maze, Mark is a specialist in both equity release and mortgage advice at Chadney Bulgin LLP Chartered Financial Planners. He also offers expert advice on client property portfolios for landowners, private landlords and finance for developers.
For help and advice on divorce in general, contact us here at LGFL Ltd for a free 30-minute consultation at our Swallowfield offices or at Spaces in central Reading.
Mark Robertson
Chadney Bulgin LLP (Fleet)
Direct: 01252 788876
Mobile: 07785 776747
Email:MRobertson
Web:Chadney Bulgin
