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Changing Personal Circumstances

Dividing the family home and mortgage during separation if you were cohabiting or divorce or dissolution if you are married.

If you are getting divorced or dissolving your civil partnership or splitting up from your partner and own your home between you, one of the biggest financial decisions you could face is what happens to it. This is a very complex area of the law and it’s essential to take advice from a solicitor who specialises in family law.

First steps to take

  • Understand how the home can be divided
  • Prioritising the needs of any children
  • Sorting out the joint mortgage

Understanding how the home can be divided

If you and your partner jointly own the family home, you have several options about what to do with it when you separate.

You might decide to:

  • Sell the home and both of you move out. You could use the money you’ve raised to put towards buying another home for each of you, if you can afford to do this.
  • Arrange for one of you to buy the other out.
  • Keep the home and not change who owns it. One partner could continue to live in it, perhaps until your children are 18 or leave school.
  • Transfer part of the value of the property from one partner to the other so that your children have somewhere to live. The partner who gave up a share of their ownership rights would keep a stake or ‘interest’ in the home. This means that when it is sold he or she will receive a percentage of its value.

Prioritising the needs of your children

Although most couples who divorce or dissolve their civil partnership don’t go to a full court hearing to settle financial disputes, it’s a good idea to have an understanding of what the courts would decide in respect of the family home.

If you have children, especially if they are young, the court will take into account the fact that they need somewhere suitable to live with each parent. The approach taken by the court does vary slightly around the UK and the eventual outcome will also depend upon your own individual circumstances. As parents, it’s important to keep the needs of your children uppermost in your minds at all times during a divorce or dissolution. This includes trying to disrupt them as little as possible.

If you and your partner are splitting up and you have children, it’s important to think about where they will live. As couples who live together, you don’t have any obligation to support each other financially after your break-up, but as parents you’re expected to pay towards the cost of your children.

One parent might be able to make a claim against the other for the right to remain in the family home. How you do this and the laws that give you these rights vary around the UK. It doesn’t mean you or your ex-partner would own the home or a share of it, but they might be given the right to live there for a number of years, usually until the youngest child reaches a certain age.

During these difficult times it is essential to take advice from a solicitor who specialises in family law.

Sorting out the joint mortgage

Many couples who have a joint mortgage and who split up, usually try and separate the mortgage so only one partner has their name on it.

Whether this is possible depends on the couple’s financial circumstances.

The advantages of doing this are:

  • The partner who stays in the house doesn’t have to rely on their ex-partner for their mortgage.
  • The partner whose name is taken off the mortgage should be able to borrow more to buy themselves a home than if their name was still on their ex-partner’s mortgage.
  • Both partners might be able to break the link that ties their credit files together. If you have a joint debt with your ex-partner (such as a mortgage or a loan), your credit files are connected. That means how you manage your debts will affect your ex-partner if he or she applies for credit, and vice versa.

As independent mortgage advisers we cannot provide guidance related to family law and we would recommend that you speak to a specialist family lawyer for advice. A mortgage adviser can assist in identifying potential options forward related to your mortgage, in line with your new circumstances.

For more information visit www.moneyadviceservice.org.uk

Changing your occupation or recent increase / decrease in income.

Getting a mortgage when changing jobs

Many lenders will decline borrowers that haven’t been in their jobs for 12 months, some even demand a 3 year working history. Thankfully there are lenders out there that consider a whole range of different employment types and length of time in employment / self-employment, you just need the help in finding them! Starting a new job can be an exciting prospect, but the impact on your creditworthiness can be affected as many lenders will consider you higher risk the less time you are with a single employer. Therefore getting a mortgage after starting a new job can be more difficult.

Thankfully there are lenders willing to consider your new contract from day 1, and some even up to 3 months before you start if it’s a permanent full-time position.

Getting a mortgage when changing contracts

If you are staying with the same employer but changing to a new role with a new pay structure, then you won’t have the 1-3 month’s payslips most lenders will require to assess borrowing. As a result some lenders will assess you as starting a completely new job, and can decline your application. There are lenders that are happy with this arrangement however as long as you can evidence your new income. This could be by way of a contract or job offer in writing from HR or a senior member of staff.

Getting a mortgage using a pay rise

If you wish to base your lending before you have payslips and bank statements to evidence it then you may find lenders limit income to your previous pay. Other lenders are more flexible as long as you can evidence your pay rise via a formal offer from your employer.

Applying for a mortgage on a new job probationary period

Probationary periods cause problems with many lenders, most of which will decline applications where employment is not seen as permanent. Other lenders see probationary periods as standard (depending on industry sector) and do not require confirmation that you will be taken on past this date.

When pregnant or on maternity leave

Lots of people move home to make room for their growing family and, if you’re pregnant, you’ll probably be keen to move in before the arrival of your little one. Understandably, this can seem like a daunting task.

In particular, you might be feeling uncertain about the outcome of your mortgage application, especially if you’ll be on a reduced income while you’re on maternity leave.

Top Tips

Find the right lender

Although you may encounter issues with some lenders, others are extremely good at helping customers who are on maternity leave. It’s really important that you find the right lender, and getting trustworthy advice from an impartial mortgage adviser will save you time and, potentially, money.

Explain your circumstances

Lenders will want to know about your circumstances. You’ll have to tell them that you’re pregnant, as they will ask you if there is anything that will impact your future income. Try not to see this as a bad thing – they just want to make sure you’ll be able to afford the repayments. Different lenders have different requirements, so it’s just about finding the right lender to match your circumstances.

Assess your own savings

As your income is likely to drop while you’re on maternity leave, you should make sure you have savings (or an alternative income) in place so you can keep up your mortgage repayments. Lenders will often want to see proof of this.

Think about your return to work

If you’re employed and plan to go back to work after your maternity leave, you will need to have a reference from your employer confirming a return to work date and the salary that you will return to. Your lender will probably want to see this as proof of your intent to return to work. Many people plan to return on reduced hours once they become parents, and your lender will want to know about any changes to your salary.

Factor in childcare costs

Remember to factor in the childcare costs you will have once you return to work. Fees for nurseries, nannies and childminders can be expensive, and it’s important to take them into account when working out the level of mortgage payments you will be able to afford.

If you need advice on getting a mortgage when pregnant or on maternity leave then get in touch and we will do our best to reduce the stress of buying a family home.

When you inherit a property

Remortgaging Inherited Property

There can be a number of instances where you might want to remortgage or simply mortgage a property which you have inherited; perhaps you inherited it along with siblings and wish to buy out their interest in it or you live elsewhere and want to release some of the equity from the property to carry out refurbishments with the intention of letting it out to tenants.

Lender Rules

Certain lenders have strict rules relating to inherited property, a common requirement is a minimum amount of time that you must have legally owned the property before any capital may be released; however this rule is not true of all lenders.

Requirements for taking out a new mortgage on an inherited property may include:

  • Probate must have been carried out making you the legal owner of said property
  • If the property is owned by multiple individuals then they all need to be on the mortgage unless you are mortgaging to acquire their share.
  • If you are remortgaging on a buy to let basis then the estimated monthly rental yield of the inherited property must be at least 125% of what the monthly mortgage payment would be.
  • Applicants must fit the lenders affordability criteria. Generally speaking the better the credit rating of all of the applicants the more products there will be available.
  • Fitting a minimum loan size

As independent mortgage advisers we offer a whole of market service, which means we can search across different lenders on your behalf to try and find the best product that fits your specific circumstances.

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