Blog

Divorce and Mortgages: What to Know

Divorce and Mortgages: What to Know

A divorce is never a convenient event to go through, but getting a divorce while still under a mortgage contract can be even more inconvenient.

Both parties in a joint mortgage will be equally liable for repaying the debt till it is settled. Meaning going through a divorce doesn’t exempt you from repaying your mortgage loan. You have to keep up with the monthly payments even if you no longer live in the mortgaged property.

Failure to make mortgage payments as at when due will result in damage to both you and your ex-partner’s credit history. Leading to losing more than just your marriage.

This is why it is advised that divorcing couples inform their mortgage lender about their separation, especially if there will likely be issues with meeting mortgage payments. Many modern banks are sympathetic towards couples in such a situation especially if they were diligent with their payments beforehand. A sympathetic bank may offer the separating couple a mortgage payment holiday to help ease the financial strain of the transition but please ensure you check with that lender to see if this will affect your credit rating adversely. If you do take up the option to take a payment holiday then interest is still charged and your mortgage balance will continue to rise as you are not making any payments.

You may be thinking a mortgage combined with a divorce is something you’ll never have to deal with. But according to the Office for National Statistics, 42% of marriages end in divorce, which means it’s something worth being mentally prepared for, especially regarding how such an occurrence might impact your home ownership and mortgage.

This guide will provide all the pertinent information you need concerning divorces and mortgages. We can also put you in touch with a specialist over the phone to discuss your options.

Is It Better to Sell My House Before a Divorce?

On paper, a smart and uncomplicated move would be to sell the house, use the proceeds to pay off remaining mortgage debt, split what’s left with your ex-partner and go your separate ways. But in reality, such an approach doesn’t take into consideration lingering emotional connections to the property (sentimental value). And for those with children, such a move can result in a logistics nightmare.

If it so happens you or your partner would like to take over the mortgage instead of let go of the house after the divorce, there are a variety of options available to help ease things along. For instance, you could opt for a simple remortgage or if you are tied in to your current mortgage deal and have Early Repayment Charges then ask your lender if you can take over the mortgage in your sole name. There will be a Transfer of Equity involved with this and you will need to financially qualify for the whole mortgage yourself in order to take it over but please ask your bank first.

But before any moves are made concerning solely taking over the mortgage debt of your home, first and most important thing to do is talk it over with your present mortgage lender.

If this fails, speak to an independent mortgage broker who may have a lender who can help.

Speak to Your Lender

Speaking to your lender about your private marital affairs may seem awkward and inconvenient, but it is nonetheless important. A sympathetic lender will offer a payment holiday to help you with managing the financial burden of the transition.

But bear in mind that responsibility of the mortgage will still lie with you till a longer term solution to your mortgage situation is reached. Ignoring your repayment responsibilities during the divorce process can lead to your home being repossessed.

Consent Orders and Financial Orders

If you are fortunate enough to go through a divorce that is amicably settled, you and your partner can mutually agree on how the finances and property will be divided. This will be noted in a legally binding Consent Order drafted by a solicitor and signed by you and your ex. A consent order typically costs £50.

But where the divorce is not an amiable one and you can’t come to an agreement with your ex-partner, you can apply to the courts for a Financial Order. The process of getting a Financial Order and the divorce process will run separately. It can also take as long as a year depending on circumstances. A number of court hearings may have to be attended and the process will typically cost £255

Can My Ex Sell Our House?

If your soon-to-be ex is the sole owner of the property, he/she actually has the power to sell the house. Fortunately, you can register a Notice of Home Rights with the Land Registry to protect your right to keep living in your home. To successfully accomplish this, you will need to verify whose name the property is registered in as well as the property’s title number.

Regardless if the property is registered or unregistered, registering a Notice of Home Rights with the Land Registry is free. But bear in mind that it only offers short-term relief. That is, it only ensures your right to keep living in the property in question till the divorce process is finalised and a court settlement reached.

If the court makes a ‘continuation order’ because of an on-going dispute regarding who owns the property, you may be able to stay in the property for longer.

Sorting Out a Joint Mortgage

In most cases, divorcing couples with a joint mortgage attempt arranging for the mortgage to be under the name of only one of the partners.

Whether or not such an arrangement will be accepted by the lender will depend on the financial circumstances of the individual looking to take over the mortgage debt.

But if accepted, the advantages of such an arrangement include:

  • The person retaining the house will not have to deal with the complication of waiting or relying on the ex-partner for mortgage payments.
  • The person taken off the mortgage will have an easier time getting another loan to purchase another home compared to if they were to remain under the initial mortgage with their ex-partner.
  • Either partner can break the connection that binds their credit files to one another. For instance, a joint debt such as a mortgage or loan with you ex-partner will result in your credit files being linked, resulting in one party’s credit history affecting the other party’s ability to apply for credit.

Divorce Mortgage Buyout

Under a joint mortgage, the credit scores of both spouses will be affected if repayments are not made. This occurs regardless if neither party still lives in the house.

To retain ownership of the property, you will need to take over the mortgage after the divorce by proving to the bank that you are making the mortgage payments on your own at due dates. Even if you prove that you can afford the current mortgage on your own, there is still a likelihood that you will need to request for a larger loan so as to buy out the stake of your ex-partner in the property.

A Transfer of Equity will also be needed to change legal ownership of the mortgaged property. This will take the name of your ex-spouse off the joint mortgage. You can approach a solicitor or a DIY Transfer of Equity pack to get this done.

Getting a Mortgage After Divorce – Guarantor Mortgages

If after going through a divorce you have trouble coping with cost of the mortgage on your own, you can opt for a guarantor mortgage. Under a guarantor mortgage, a close relative or perhaps your ex-partner will agree to guarantee the mortgage payments in the event you fail to pay. The guarantor in such an arrangement typically has to offer their own property as collateral, so that the lender can pursue the guarantor for the unpaid debt in the event you default in payment.

Guarantor mortgages are also a viable option if your decision is to sell the mortgage property and buy a new property elsewhere. But bear in mind that not all lenders are keen on offering guarantor mortgages. Most prefer to offer a joint mortgage under which the parent, sibling, or other party will be a joint borrower and owner alongside the divorced applicant.

Specialist Divorcee Mortgages

Specialist divorcee mortgages are a relatively new phenomenon. Yorkshire Building Society’s Fresh Start range charged minimal rates of interest in the first couple of months but then the interest rate does increase after 6 months so please make sure you are able to afford the payments after the first 6 months.

Unfortunately, finding such a mortgage arrangement today will be difficult. But some mortgage providers still offer certain initiatives that assist divorcee borrowers. To find such a mortgage deal, get in touch with a reputable mortgage broker to see what options are available.

Child Maintenance and Your Mortgage

When it comes to child maintenance and mortgages, it all depends on your lender’s policy. The lender may take into consideration a 100% of child support payments, or only a percentage of it, and in rare cases, not consider it at all when evaluating a divorced borrower’s capability to repay the applied for mortgage. In order for the lenders to take maintenance into consideration it will either need to be court ordered, paid regularly or paid under Child Support Agency.

There are also some borrowers that only take child support into consideration if it has been ordered by the court or it’s already being paid for at least 12 months. A mortgage broker can provide you professional advice concerning what your best options are in such a scenario.

If you would like to make an enquiry now concerning divorce and mortgages, please contact us today and one of our mortgage experts will get in touch with you ASAP.

How to increase the value of your home through renovation

How to increase the value of your home through renovation

Are you considering renovation of your home? Prepare for a long and hard work, which will, fortunately, be followed by enjoying time with family in a lovely, neat home. There are steps to renovating the house which you should have in mind and shouldn’t skip. Because if you try to do renovation quickly and without good planning renovation might turn into a nightmare instead of being a pleasant experience.

Excellent and detailed planning is essential for good renovation. You need to know what your end goal is, whether you are renovating to improve the resale value of your home or you will be living in it for years to come. Having a plan for your future will help you decide how deep to go with your project. Also, consider the condition of your neighbourhood before you begin, and know which renovations are return on investment, and which will be over-upgrade for the area. At this moment it is good to check permits for the renovation and make one because there might be a time when you will need it.

Even if you are planning cosmetic remodelling, there is an opportunity to enhance the function or money-saving capability of your home. When renovating an entire room, for example, this may be the perfect time to upgrade your electrical panel, add insulation to the walls or add additional light or electrical fixtures. Thinking ahead is the key to successful upgrade structure of your home.

Will you do renovation yourself or hire professionals?

This decision might be difficult, but it affects not only the budget but also time spent in the remodelling. Professionals will do the job in much shorter time. Also, there is a possibility of errors or incidents which you could not see coming if you do a job yourself. Do proper research with friends and family who did renovation recently because it might help you make this decision, or even alter your end plan. Whatever you chose to do, make sure to have insurance in case of any unexpected event.

So you decided to hire professionals for renovating? You need to make sure that the contractor is right for you because he’s going to be in your home! When you talk to contractors, ask for references and do a proper interview. And put all the things you talked about in the contract!

Perhaps you have decided to do renovation yourself? It is a great way to save money, involve the entire family and have a sense of accomplishment. But be cautious:  if you don’t know what you’re doing the whole project can turn disastrous. Know which tasks you can safely handle, and which should be managed by professionals, as a complete renovation of the home will need professional builders at some point.

Next step is making a budget

Knowing your budget and sticking to it is one of the crucial parts of renovation planning. Your budget will differ in case of renovation of whole house from scratch compared to aesthetic improvement. Don’t forget to add in a fund for unexpected costs and incidental costs like taking a hotel for a night or two if needed. Be realistic about your budget!

Make plans to stretch your budget as far as it can go, by thinking outside of the box. Did you know you can find building materials online like plastic drainage, and guttering? Often you’ll find them to be a quarter of the price they would be in a builders merchant, with next day free delivery!

Now, you have the plan, the budget, the contractor or instruction how to do it yourself, and you can start renovation! It would be useful to have children and pets cared for at a different location if possible at familiar family and friends during remodelling, for their safety.

If you are doing partial reconstruction, move all the items from the working area. But if you are remodelling the whole house, you will need a secure place to store furniture and other items. The right idea is to rent affordable self-storage and hire removals company to transport all your items to another location.

What construction work needs to be done?

Heavy work will be done first, and that means demolishing walls if needed, changing windows and doors, renovating electrical system, changing floors. Perhaps you will change driveway, or the whole yard together with the house. Priority in this phase is making the site safe and secure, and this includes hazardous waste removal. At this moment you will also change doors and windows if needed. Choose wisely, because this is the time to make your house lighter by adding large sliding glass doors or French doors and also larger windows.

Remodelling bathroom could include complete changing from replacing tiles, or you can change only sanitary ware and taps. The same goes for a kitchen: you can remodel it from scratch, but changing appliances, tap, sink and cooker might be as effective. When choosing the style for the kitchen and bathroom, have in mind that picking the latest, hottest, coolest things is nice, but trends mean that it’s short-term and you want something that’s going to stand the test of time, and last for years and years.

After rough and heavy work is finished, it is time for painting home. When choosing paint colour, keep in mind that neutrals are more attractive, and make your home more appealing. This is the job you can do yourself, but you can also hire professionals for house painting. They can give you advice about the different quality of paint and help you in choosing the right colour for each room.

Choosing right furniture, rugs, carpets, curtains and shades is next vital thing to be done. Perhaps you will keep old furniture and change upholstery, or completely change the style of your home. If you do a complete change, make sure that all materials fit the same style and are of a similar colour with wall paint and curtains.

Shades are quite popular lately, as proper shades can be enough to change looks of windows and give your home a new style. Additionally, shades can complement any room decor, and they give you complete control of the amount of light that enters a room. Top down bottom up shade is a new type of shades that is becoming increasingly popular because they are the only style that can allow sunlight within a room while still giving the privacy that people want. That is why you can find discounts on top down bottom up shades in colour that best suits your room.

As the end of renovation is getting closer, there are only details left to be done. Add lovely cushions, vase, mirror and other decoration to make your home cosy and enjoy time with friends and family in a new ambient and relax because renovation is over!

Insurance Watch: Bring it home to first-time buyers

Insurance Watch: Bring it home to first-time buyers

First-time buyers are less likely than others to see the need to protect their mortgage payments — so advisers must focus on the facts.

The difficulties facing first-time buyers are well known. That said, brokers have done a great job of helping this group get onto the housing ladder in recent years and we are seeing more first-timers take out mortgages than ever before.

In fact, recent figures from Halifax show that nearly half (46 per cent) of house purchases financed by a mortgage last year were made by first-time buyers.

However, while this is positive, the fact remains that many of these buyers fail to take out the insurance needed to protect themselves.

Unfortunately, many still seem to think that life insurance, critical illness cover and income protection are an unnecessary expense. In part, this may be because many first-timers are single and do not have any dependents, so it can be difficult for them to envisage who would be financially affected if the worst were to happen.

Accord adds 95% mortgage range for FTBs

Accord adds 95% mortgage range for FTBs

Accord Mortgages has launched a range of 95 per cent LTV mortgages specifically for first-time buyers.

The deals are available at two and five-year fixed rates and come with £1,000 cashback on completion and free standard valuation.

Certain deals are available fee-free, including a two-year fix at 3.94 per cent, or a five-year fix at 4.40 per cent.
The lender has also reduced rates on selected high LTV options by up to 0.05 per cent for home buyers with small deposits.

This includes a 3.63 per cent two year fix at 95 per cent LTV with £495 product fee.

Accord mortgage manager Jemma Anderson says: “Spring is a popular time for people taking that first step onto the property ladder, so is the ideal time for us to enhance our product range with specific options aimed to help brokers support their customers with the biggest financial decision of their lives.

House prices creep up in April: Nationwide

House prices creep up in April: Nationwide

House prices rose by 0.2 per cent month-on-month in April, according to the latest Nationwide house price index.

The year-on-year change is 2.6 per cent, and the lender says the average house price is now £213,000.
Nationwide chief economist Robert Gardner says: “There was a slight pickup in UK annual house growth in April to 2.6 per cent, from 2.1 per cent in March. House prices rose by 0.2 per cent over the month, after taking account of seasonal
factors.”

Mortgage Advice Bureau head of lending Brian Murphy says: “Whilst growth is, at best, incremental, it does at least point to a market which remained robust in the first four months of this year, and one that is performing within the parameters expected by analysts who predicted that annual house price growth would be at around this level in 2018.”

The Nationwide figures are not seasonally adjusted.

Foundation Home Loans director of marketing Jeff Knight says: “Cities in the North of England are experiencing sustained price growth, adding to the already substantial challenge facing those looking to get one foot on the property ladder and pinning their hopes on a home outside the capital.

“Even with stamp duty cuts and low mortgage rates alleviating some of the pain points experienced by renters and buyers alike, affordability continues to remain a concern for the majority of those looking for their first or second home.”