Mortgage Assessments in Matrimonial Financial Cases

During the course of financial remedy proceedings, it is likely that there will be some change to lifestyle, future plans, housing, etc.

The Court is focused on parties being able to suitably re-house with the paramount consideration being to any children of the family to the divorcing couple.  Future living arrangements is often a big part of the challenge in reaching a settlement which is fair in the circumstances.  Deciding who should live where often depends on the size of the matrimonial pot and who can afford what, which, in turn, can lead to animosity and contentious proceedings.

Decisions regarding living arrangements and who can stay in the family home can be difficult to agree on and even more difficult to obtain details and unbiased information when it comes to valuations and looking at future mortgage affordability and borrowing capacity.

The Courts at a first hearing will usually direct the divorcing couple to obtain sales particulars for properties that they believe suitable for themselves, as well as properties they believe suitable for their spouse.  In addition, the Court will also require evidence of the mortgage capacity the respective parties may have.  Different lenders of course have different criteria.  Borrowing capacity is likely to be in flux as the divorce settlement is negotiated and an independent mortgage capacity report can often paint a far more accurate and unbiased picture rather than relying on the word of one particular lender where all of the terms of borrowing are not clear on the face of it, for example, an internet enquiry on a lenders website.

An independent mortgage capacity report can provide more detail than an individual mortgage lender who can only provide lending information about their own product.

Different lenders have different factors that are taken into consideration.  Some lenders will take into account receipt of welfare benefits and child maintenance as income within their calculations when looking at affordability. Such income can be taken into account in the same way as income from employment would be.

There are many reasons why I advise my clients to obtain a professional mortgage capacity assessment.  These factors include:

• Where my client does not have the time to trawl the high street banks or complete lenders affordability assessments to find this information out for themselves;
• Where the individuals financial circumstances are either complex or unusual, for example, many sources of income, self-employed clients, clients who have had recent changes in employment or perhaps historic bad credit;
• It may be beneficial for a client to go and discuss with a mortgage broker various types of scenarios, for example, potential financial settlement, varying amounts of maintenance, varying amounts of deposit for a property, which, in turn, could affect a loan to value calculation, second mortgages and so on. 

Whilst mortgage providers will complete affordability checks and can provide mortgage in principle information, a mortgage is not secure until such time as a full mortgage offer has been made.  An independent mortgage broker will be able to give clients advice as to the likelihood of being able to obtain a full mortgage offer.  Other difficulties that clients regularly encounter in divorce settlement negotiations can take some time to finalise and, if negotiations cannot be finalised within a short period of time, lenders can change their criteria.  This could leave clients in a difficult position if they are not able to get a reliable idea of capacity before reaching a financial settlement.

A detailed mortgage capacity report would provide my client, my oppositions legal representatives and the Court, if need be, with detailed information about the maximum borrowing ability, the cost of the borrowing and the mortgage fees associated.  Such reports can also assist in mediation.  Assessments are designed to provide divorcing couples with specific information regarding their likely borrowing potential, which can take into account a range of mortgage lenders, different mortgage products and widely varying lending criteria.

Any questions regarding financial settlement, mortgage capacity information and/or the Court’s approach, please refer to Jennifer Allen.