If you’re looking to get a mortgage following a divorce, you may be faced with certain obstacles along the way, particularly if you’re already named on a mortgage with your former spouse.
Mortgages can be a particularly difficult asset to divide. There are a number of options available, but it can sometimes be tricky to mutually agree on the best way to resolve your finances during a separation.In this article we’ll run through the various things that you’ll need to take into account in order to secure a mortgage following a divorce.
Make sure you don’t fall behind on payments
Before you start the process of separating your finances, decide with your partner how mortgage repayments are going to be made in the lead up to any financial changes you make. Even if you plan on re-mortgaging or selling the property, you need to continue making current payments up until the house has been sold or a lender has completed any changes you wish to make.
If one of you owns the home
If the home is in just one partner’s name, the partner whose name is not included should find it easier to secure a new mortgage themselves, providing they meet all other criteria set by a lender. However, they’re also less likely to have any rights to the property they shared with their partner, unless they can prove that they contributed towards the property in some way, for example if they were helping to make mortgage repayments.
If both partners have ownership
If you have joint ownership of the home, it can only be sold if both partners agree. It may be possible for one partner to buy the other partner’s share.
You’re both responsible for a joint mortgage regardless of whether you’re still living in the property or not. So even if one partner vows to keep up repayments while the other leaves, if the partner staying in the property falls behind on repayments, both partner’s credit score will be affected.
Selling the property
Selling the property and splitting the costs between those who are financially connected to it can often be the easiest way to move on to somewhere new. However, complications can arise if one party has placed a larger investment in the property than the other, or if each person has paid for different aspects.
If one partner wants to stay and the other is moving out, re-mortgaging is necessary to change the property’s ownership. The person who wants to stay will have to prove to the lender that they are capable of covering the mortgage payments alone, without the help of their ex-partner. If this person doesn’t have strong enough finances, the lender is under no obligation to remove the other partner from the mortgage deed.
Moving on: How easily will I get a mortgage if I’m divorced?
Mortgages for divorcees
These days getting a mortgage can be difficult even in the best circumstances. Sadly, it can be even more of a struggle post-divorce if you’re already connected to another mortgage. However, some lenders aren’t going to instantly say no to you, and will provide a proper underwriting process to assess your case individually, rather than relying on computers to make a decision.
Provide your mortgage company with as much information as possible so that they understand your current situation. By providing them with misinformation or a lack of details, you might end up slowing down the process and reducing your chances.
Whether you want to stay in the property or get a new mortgage elsewhere, if you cannot prove that you are able to meet the repayments, you could apply for a guarantor mortgage. A guarantor mortgage requires someone you know to step in financially if mortgage repayments are not met. Typically a guarantor will be a parent or sibling, and they’ll make any mortgage payments if you’re unable to. Guarantor mortgages can be easier to attain as the lender is given peace of mind that they are covered if arrears occur.
Scale back on your next property
As of 26th April 2014, new mortgage rules dictated that potential borrowers must prove to their lender that they can afford the mortgage even if interest rates were to rise in the future. The rules have been put into place not only to ensure that lenders receive mortgage repayments, but also to prevent borrowers from getting into arrears.
If you want to buy your next home independently, consider how different things will be when financing your home alone, without having someone else to help share the costs. You’ll have to factor in a deposit, surveyor fees, redecorating and removal costs and most importantly, mortgage repayments. If you aren’t on a great rate you may find yourself struggling to make ends meet, and if the initial costs associated with buying a property are too high, you may not get off to the best start.
If you suspect your finances aren’t where they need to be to buy again just yet, consider renting until you’re in a stronger position financially. You won’t have to pay the fees required to buy, you won’t be liable for repairs and you’ll benefit from inclusive furniture if you rent a furnished property. If you can find an affordable home to live in, you may be able to gradually save up to buy again in the future. However, it’s believed that renters pay £1,300 more than buyers each year.
Starting afresh with a credit divorce
If yourself and your former partner have finished paying off a joint mortgage and now own the home, getting a new mortgage yourself should be that little bit easier. You’ll still have to decide how you will separate your finances, but since you won’t be tied to another mortgage, some lenders will consider you a worthy buyer.
Your former partner’s financial situation can still affect you long after you separate, which is why it’s important to apply for a credit divorce whether or not you suspect that any problems may arise.
If your former partner was to land themselves in financial trouble, you may be chased for the money that they owe, even if you are no longer together. Their finances can also affect your credit rating, making it difficult to get a new mortgage or a loan.
Many divorcees assume that by getting a divorce, they are automatically separating their finances too, but this is not the case. If you’re connected through a mortgage or share a joint bank account or credit card, you will have to contact your lenders in order to change your contracts.
You’ll also have to get your connection removed from your credit report. This is called a financial disassociation and needs to be completed by a credit agency.
Getting a mortgage after a divorce isn’t impossible, but you may have to work a little bit harder to prove that you’re in a good position to borrow. If you’re looking for a fresh start and want to find out whether you’re eligible for a mortgage, please don’t hesitate to get in touch.
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