Consider the mortgage when divorcing

©Bloomberg

The four D’s – debt, divorce, death and downsizing – have long been regarded by estate agents as the main reasons why people move house. Estate agents say the number of clients citing divorce becomes even more common in January.

The first month of the year is traditionally one of the busiest when it comes to couples separating. Figures from Relate, the relationship charity, show a 52 per cent rise in the number of people seeking support in the new year, compared to December.

One buying agent has launched a service aimed at helping people who have recently gone through a divorce and need help dividing the marital home into two new properties.

“I found that last year I was spending more time helping out one or both parties who were trying to deal with the practicalities of splitting the old matrimonial home into two properties,” said Henry Pryor, a buying agent. He charges £180 a week for this service.

Experts say couples need to consider carefully the implications of agreeing to various elements in the divorce settlement, such as the division of a shared home.

Jonathan Harris of Mayfair-based mortgage broker Anderson Harris warns that getting a mortgage has become “trickier” since the downturn.

“We are increasingly getting referrals from lawyers before a settlement is reached to ensure that a mortgage is viable once the division of assets has been reached,” he explained.

Women might need to consider how they are going to finance their home, particularly if they rely on maintenance payments as part of their income.

Mortgage brokers warn that some lenders refuse to consider maintenance payments when judging affordability for a mortgage, limiting the amount the homebuyer can borrow.

“Lenders do have varying views on maintenance payments, which must be confirmed by court order and have a reasonable period to run,” noted Nigel Bedford of mortgage broker Largemortgageloans.com.

The major high street lenders typically fall into one of four camps: Those that take 100 per cent of payments; a proportion of payments; do not accept them at all; or consider them on an individual basis.

For example, Nationwide Building Society, Skipton Building Society, NatWest and Woolwich accept 100 per cent of payments. Halifax will accept 60 per cent, while Leeds Building Society, Santander and Nottingham Building Society will consider 50 per cent of maintenance payments as income.

However, Coventry Building Society, ING, Norwich & Peterborough Building Society, Post Office and Principality Building Society do not consider these payments at all.

First Direct, HSBC, Clydesdale and Yorkshire Bank and Tesco Bank will consider it on an individual basis.

“This shows that all is not lost for divorcees. Although the full range of mortgages will not be available, most can be accessed,” said Bedford.

Another issue for getting a mortgage can occur if the husband is buying a property for his estranged wife as he will need to ensure he has sufficient income to fund two mortgages, as this will be assessed on his income.

“If he has very high maintenance payments to meet, it could affect his ability to service his own mortgage payments, while if he has to relinquish some of his pension fund to his wife, this may make him less attractive to a private bank,” explained Harris.

Another potential problem will arise if one of the partners wishes to remain in the marital home where the mortgage has not yet been paid off. The divorcee will have to prove to the lender that they can cover the mortgage payments alone.

Clive Beer, head of Savills rural professional practice, often deals with couples going through divorce.

“The adjustment to gearing down to a smaller property can really destabilise people. One of the things I say first of all is let’s have realistic expectations from day one. Define the capital that you have available to purchase a house and be reasonable with those expectations.”