These blogs are written by third party guest authors to help provide additional insight and perspective.
By Sarah Tucker, Managing Director, The Mortgage Mum, (pictured) a multi-award winning all-female brokerage, who believes mortgages are about more than just money.
This guest post is part of a series of blog posts aimed at helping parents with their mortgage concerns.
Solicitors are preparing for an even greater spike than usual in divorce or separation enquiries this year. With pressures brought on by the cost of living, and the passing of the no-fault divorce law in April, meaning couples can divorce without putting the blame on either party.
Deciding to separate is one thing, but what happens when you have children? How do you navigate getting a mortgage as a single parent? And how do you separate the house you currently own as a family?
Following the emotional side of deciding to separate, often one of the first things people do is think about the money side of things. As human beings, when our emotions are in distress, our trauma response is to seek control. And money is something everyone wants to be in control of!
Therefore, looking at your mortgage is often one of the first calls you tend to make to stay where you are if possible.
Make sure you call the right company for you
So make sure when you make that call, that it is with the right person. At times like these, you are going to really value seeking advice from someone who is going to handle your enquiry with empathy, care, and compassion for your situation, as when people are in a highly emotional situation, they could become vulnerable to making poor financial decisions.
You need to find reputable organisations and people that empower you to make the right decisions for you and your family, both now and in the future.
What do you do when you own a house together?
When you own a house together, and one of you wants to stay there, the first thing you need to look at is whether you can afford your mortgage on your own.
You also need to see how much equity you currently have in the property. This is the difference between the property’s current value and the amount left on the mortgage.
Get your property valued
It’s a good idea to get an estate agent round to value your property and even better if you can get three different valuations to gain a clear comparison.
It’s important to be aware that a remortgage valuation can be much lower than a market valuation – just as a head’s up! It will, however, give you an idea of the value of your property if you’re unsure.
Call your lender
Next, call your current mortgage lender and ask them the following:
- What is my current balance?
- When does my current product end?
- What are the penalties for exiting early?
Next, call your mortgage broker
If you don’t have a mortgage broker or have never used one before, now might be a good time to start. You can speak to a mortgage lender directly but it can be helpful to have a broker by your side to help steer you in the direction of products and providers who are most likely to consider your application.
They’ll want to know the answers to the above questions, so it’s good to be prepared. From here, they’ll weigh up your options. You may need to consider three scenarios.
1. Staying with your current lender, and borrowing more to buy your ex-partner’s share of the property
2. Remortgaging to another lender – this is often better if you can’t afford to stay with your current lender, but there are other banks or building societies who may lend you more or give you more options
3. Affordability. Sadly, it is more common that the person who wants to remain in the house cannot afford to get a mortgage alone. This is particularly common if there are children involved, and they provide some of the childcare. However, there are things you can do if you can’t afford a mortgage on your own.
What can you do if you can’t afford a single parent mortgage on your own?
Don’t despair. There may be other ways that a single parent can continue to stay in their home. They aren’t all available from every lender but it’s helpful to know what options might be available to you.
1. Additional Income
Firstly, some lenders will look at additional income, to top up your salary.
The following may be taken into consideration when assessing your affordability:
- Child Benefit Payments
- Tax Credits
- Maintenance payments from estranged partners
- Universal Credit and Disability benefits may also be considered in some cases
2. Adding people to your mortgage
This can take many forms, but it is very common in those early years following a separation. It involves adding family members to your mortgage, to give a helping hand with affordability. And this doesn’t necessarily mean they will own any of your property or live in it with you. This is known as Joint Borrower Sole Proprietor Mortgages.
This is where a lender will allow you to have a mortgage with someone who is not on the title deeds of the property and doesn’t live there. That person will need separate legal advice, but it’s a possible option to help you borrow more.
3. Guarantor Mortgages
A guarantor mortgage is when another party, usually a close family member, offers their own home or other assets as security on your mortgage. Very similar to Joint Borrower Sole Proprietor Mortgages, they’ll need their own legal advice. Again, this allows you to borrow more than you could on your own.
What if you want to buy your own place?
You may decide you want a fresh start, and you want to buy your own place as a single parent. In addition to the above, you have other options to consider to boost your affordability, and your overall opportunity to purchase.
1. Family Gifted Deposits
This can come from parents and family members and allows parents to gift their children a deposit to buy a home. The lender will often ask for a letter to ensure that they do not want to be paid back, and therefore have no financial interest in the property.
2. Shared Ownership
The Shared Ownership scheme allows those with a lower income to purchase a percentage of their home, making the monthly repayments and deposit much more affordable.
3. Other lender schemes to boost deposit or affordability
Mortgage providers are highly innovative and the Government also creates new initiatives, so there may well be other options not listed here. A broker will navigate the whole of the market to assess all of your options, so together, you can weigh up what’s best.
It’s often helpful to consider a mortgage provider who undertakes a manual underwriting approach, as this means that each mortgage application is reviewed on its own merits by a real human being – not a computer system that could automatically refuse to lend to you.
In the end…
It’s about discovering what all of your options are and enabling you and your family to have a safe home.
At the time of divorcing, the money side of things may feel like the most crucial consideration but in fact, the most important thing in this is you, and your wellbeing. It’s about helping you to imagine a new picture that will bring happiness into your world.
While this may not be what you originally had planned, you will be able to find the opportunity in it when the time is right and you are emotionally and financially ready. Navigating a new home and new mortgage might feel daunting but there is a great deal of pride to be had in making something happen that is important to you and your children and making your new dreams a reality.
Guest post supplied by The Mortgage Mum. By publishing and hosting information from guest authors on the Suffolk Building Society website this does not constitute an affiliation with, nor a recommendation of, any third party organisation. We recommend that if the content of this article applies to you, or if you require further information on the particular topic it raises, that you seek specialist advice.
