Today is the day that legal firms typically see a surge in queries from spouses planning to separate following the festive period.
Thanks to the Mortgage Market Review (MMR) bringing in stricter affordability criteria for those looking to buy a home, specific groups of people are finding it harder and harder to get a mortgage, and divorcees are the latest group to join these so called ‘mortgage misfits’.
Whilst these ‘mortgage misfit’ divorcees may be able to afford the mortgage in reality, due to a variety of income channels, the computer based affordability tests used by many lenders automatically assumes they cannot afford the repayments because they do not recognise child maintenance as income. Our infographic below illustrates why this is a big problem for a growing mortgage misfits group
To tie in with Divorce Day, Ipswich Building Society is launching its Divorce Mortgage Programme.
All of the lender’s residential mortgages will be available to divorcees with 100% of the income from child maintenance taken into account when assessing affordability, provided it is supported by the Child Support Agency or Court Order and has at least five years to run. This allows newly single parents, working full or part time, to have access to the mortgage market.
All applications undergo a manual underwriting process meaning each case will be considered on its specific circumstances. Furthermore, when assessing affordability, the Society’s underwriting team will accept the applicant’s evidence over the Office for National Statistics data for certain items when lower than the suggested average.
According to the Office for National Statistics an estimated 42 per cent of marriages now end in divorce with the highest rate recorded amongst those within the 40 to 44 age bracket.
Paul Winter, Chief Executive of Ipswich Building Society, said, “Despite a significant number of people across the country having been through a divorce, there is little consistency in terms of lending criteria for divorcees. Some banks and buildings societies will accept just 50% of income from child maintenance, whilst others refuse to accept this as a form of income at all, limiting single parents’ access to the mortgage market. Furthermore, with the divorce rate highest amongst those in their forties and increasing amongst the older generation, this can add to the difficulties older borrowers already face when looking for a mortgage.”
This post is in association with Ipswich Building Society. Based in the East of England, Ipswich Building Society is championing mortgages for mortgage misfits, providing accessibility through manually assessing each applicant’s case on an individual basis.