Until recently, many banks had inflexible criteria for assessing the affordability of mortgages for divorcees. In some cases, the weaker financial party on divorce could be disadvantaged and fail a mortgage assessment, despite having a sufficient income. Most lenders would expect the divorcee to have some form of earned income (usually from employment) before allowing any form of borrowing. This could be problematic, particularly if the divorcee had taken time out of the workplace to care for children or was combining part-time work with childcare.
Many lenders either do not take into account the income generated from child maintenance payments or only partially accept it. This is despite the fact that maintenance payments, for many, are their largest source of income following the breakdown of their marriage.
Child maintenance is financial support paid towards a child’s everyday living costs. The parent without the main day-to-day care of the child pays child maintenance to the parent with the main day-to-day care. Parents can either agree the level of child maintenance or apply to the Child Maintenance Service for an assessment. Over one million parents are in receipt of child maintenance in England and Wales.
Recently, more lenders are choosing to help those who they identify as ‘mortgage misfits’ (divorcees are considered to fall into this category) by taking into account the full amount of child maintenance received. Often this is subject to the payment of maintenance being supported by the Child Maintenance Service or a court order.
Simon Blain, a partner in the family team at Penningtons Manches, welcomed the changing attitude of mortgage lenders who are treating each case on an individual basis rather than using an automated service. Simon commented: “Mortgage lenders’ willingness to take into account the income received from child maintenance will have a significant impact on the options available when negotiating a financial settlement on divorce.”