4 January 2016

Welcoming 'Divorce Day' with Mortgages for Divorcees!

Who knew?!  

Such is the surge of separating spouses to solicitors offices on the first working Monday of the new year, it's now been nicknamed 'Divorce Day!'

And although it makes me laugh nowadays, the truth is that the Christmas holidays can be a painful time for many people.  Simmering tensions and enforced togetherness can bring things to a head that might have ticked along for years and, finally, one partner or another will decide to break free. 

The trouble is that, sometimes, this is only partly possible. 

I split from my ex-husband seven years ago now.  We'd been separated for some time before he joined my family for a few days one Christmas and it was so awful (for me) I was among many in the queue that first week of January to file for divorce.  That was that and I've never looked back in that particular regard. 

However, we've never been able to break free from each other financially, despite the fact he didn't support us at all for quite a long period.

Even though I invested quite a large sum into our house, it was purchased in joint names for the mortgage we needed - to cover the extra and, in time, to do the work required.  He has never contributed to it and never will, never pays for any repairs or insurances and won't be footing any of the bill for the balance when it matures.  He agrees that it's all down to me.

But if I die, he inherits everything.  All my hard work in the city, all my years of paying and doing everything to keep a roof over the childrens' and my head since he was asked to leave, the lot.  This worries me.  And it's wrong. 

I want to protect my childrens' interests and leave them (or my immediate family should anything happen to all three of us) their rightful legacy, but, until now, lenders have been loathe to consider divorcees to stand on their own as viable mortgagees.

I say 'until now,' because it seems the  Ipswich Building Society  have come through, in a new move to help us and although I find their term 'mortgage misfits' a little offensive, the idea behind it is so exciting that it was featured in the Telegraph on line last week-end and I was delighted to be a case study for them.

They are naturally focussing on the finances but the emotional ramifications are massive because they will be helping people finally sever connections that are no longer appropriate or they no longer desire. 

The main premise seems to be that they will now include maintenance payments as income - something more or less irrelevant in my case, but where larger amounts of money change hands monthly, this could have a positive impact for both sides. .  

Also, where they say they are using real people (rather than a computer) to take the decisions has definitely inspired me to apply on merit.    

I asked the Ipswich Building Society to explain:

Life after divorce: You and your mortgage.

With 42% of all marriages ending in divorce it would seem that the season of goodwill is not all it is cracked up to be for many. In fact, typically the first working Monday in January (this year January 4th) has been deemed ‘Divorce Day’, being the day when legal firms see a surge in divorce related enquiries.
During a divorce, untangling possessions and finances can be stressful, so when all is done it would be easy to presume things going forward will be plain sailing. However, this isn’t always the case. When it comes to a jointly owned home, there are implications regarding the mortgage for both parties both during and after a divorce, and it can often be difficult to get a new mortgage in the future. So, thinking about the practicalities, what does this mean when it comes to getting a mortgage after you and your spouse have separated?
Why might some divorcees find it hard to get a mortgage?
In 2014, the Mortgage Market Review shook up the way that we apply for mortgages, imposing stricter affordability criteria and meaning lenders calculate the incomes and outgoings of applicants and judge if they can afford mortgage repayments not just now, but also in the event of any future interest rate rises.
This means that in the last couple of years divorcees have found themselves in the ‘mortgage misfits’ category – a term used to describe those who have found it harder to obtain a mortgage after the regulation.
What does this mean for divorcees?
In many cases a divorce typically results in a reduced household income. Unsurprisingly, the impact of this is felt most in households where one parent takes on child care responsibilities after the divorce. With 2.8 million UK households consist of lone parents and 48% of divorcing couples had at least one child aged under 16 living with the family it really is startling then to learn that only a handful of mortgage lenders will accept child maintenance payments - a crucial source of income for many after a divorce - when making affordability calculations.
Luckily, we are one of the lenders who do include child maintenance in our affordability assessment for a mortgage and we are campaigning for ‘mortgage misfits’ to have fairer access to the mortgage market. As such, we accept 100% of child maintenance for mortgage applicants throughout England and Wales, where supported by a CSA or Court Order with 5 years left to run.
Another option is to try to find mortgage lenders which use real people to do their underwriting, as they consider applications based on merit rather than a computer based approach. Often these manual processes are used by smaller lenders, such as regional building societies and some specialist banks.
Three top tips if you’re divorcing and have a joint mortgage:
  1. Check your mortgage agreement, or speak to your lender if you are unsure of the conditions for both parties. A mortgage is a big commitment and has a continual obligation for all named holders, regardless of any relationship breakdown.
  2. A separation is a massive upheaval and you may face financial difficulties. Remember if you happen to miss a payment, or go into arrears even just for a short while it can affect your credit and your ability to get a mortgage in the future.
  3. Long term you need to consider the options. It may be that one party can take on the mortgage by themselves, and buy the other out of their share of the property. When going through the courts the priority will be to ensure any children have a secure home. Some typical orders the courts may make, include:
    1. transfer of ownership, with lesser share of possessions;
    2. retaining joint ownership but giving one party the right to stay;
    3. transferring the home to one party but with a charge secured on the property (ensuring the other party receives a set percentage when the home is sold), or
    4. selling the home and splitting the proceeds between both parties in whatever proportions are deemed fair.
Remember, many of these require a change in mortgage contract so make sure you speak with your mortgage lender as soon as possible. In addition, as every situation is different, it is best to seek legal advice and speak to a professional in the first instance about your options if you and your spouse decide to divorce.

This is a collaborative post that has made me jump up and down with joy!