Child maintenance issues lead to mortgage woes for divorced parents
Posted 13 January 2016 by Keith Osborne
Early January is historically a time where there is a huge increase in the number of married couples filing for divorce. Divorce brings its own financial problems, and one of the main issues is the difficulty single people can have in finding a lender that will agree a mortgage for them.
Many lenders don't take child maintenance payments into account as income, meaning it can be tough for single parents to get the home loan that they need.
For many people, child maintenance is one of their vital sources of income. However, many lenders won't take this money into account when deciding how big a mortgage they will agree.
For example, the Daily Telegraph reports that the Coventry Building Society will not take maintenance income into account even when it is backed up by a court order. Santander and Accord, part of Yorkshire Building Society, will only count 50% of the maintenance payments towards total income.
Other lenders are more generous, with Halifax, Barclays and Metro Bank taking 100% of confirmed maintenance payments into account.
Now, a leading mutual has announced that it will offer “more favourable” affordability checks for newly single people who are in receipt of child maintenance payments. Ipswich Building Society has announced that it will take 100% of child maintenance payments into account under its 'Divorce Mortgage Programme' as long as they are supported by a court order or by the Child Support Agency (CSA) and have more than five years to run.
Mortgage expert David Hollingworth, says that said single parents can run into problems if the mortgage term is longer than the scheduled maintenance payments. He says: "These payments are to help look after children, so they usually run until a child turns 18. If the payments are due to stop before the mortgage ends, lenders could ask for evidence of additional income to support the loan."
If you are paying child maintenance then you might also find it hard to get the mortgage that you need. Most lenders will deduct the cost of the maintenance payments from your annual income when assessing affordability, meaning the amount you can borrow may be less than you think.
Keeping up repayments on a joint mortgage is vital to your credit rating
If you are separating and you have a joint mortgage it is vitally important for your credit rating that you ensure that the mortgage payments are being made - even if you are not living at the property.
Keith Osborne, editor of Whathouse.com, says: "If your mortgage is in joint names then both parties are responsible for the repayments irrespective of who is living in the house. A missed payment will have an impact on both of your credit ratings. Keeping up the repayments is crucial otherwise you could find it impossible to get a mortgage when you want to buy a property in your own name."