Peter Tsouroulla explains the ins and outs of mortgages when your family circumstances are changing.
Now the dust has settled from the general election, the Bank of England has started warning of interest rate rises soon to come. Although it seems inevitable that rates will start to go up, in my opinion this is likely to happen in closer to twelve months from now than six. This is the busiest period in the London housing market I’ve seen for some time: as if the election delayed the usual springtime property market and pushed it all towards the autumn instead. I’m dealing with lots of people buying property, and even more remortgaging to take advantage of some attractive offers from lenders while interest rates remain at this historic low. As it’s a speciality of mine, I’m also seeing lots of clients going through divorce and looking into their options for financing the plans they need to make for separate future lives.
For those currently looking to raise mortgages to assist with the purchase of property on divorce, there are some good mortgage products around. There are some good fixed rate offers that offer certainty and predictability of expense, although for these you trade flexibility. As ever, a good mortgage depends on your particular circumstances and for such a significant purchase it really is worth taking individual advice about what might work best for you. However, there are some general principles that might help while you’re trying to get a preliminary picture of your options.
For those who are employed, it’s seldom difficult to find a good mortgage deal at the moment. Even if your personal circumstances are changing, your payslips can evidence affordability and confirm your regular income, which is just what the lenders want to see. At the moment it’s possible to find lenders who will lend up to 4 or 5 times your annual salary, and interest rates are attractive – of course, it’s important always to bear in mind that they will not remain this low forever, and plan accordingly.
If you’re self-employed, you may well find that there is a conflict between evidencing the affordability of a mortgage to a lender, and ensuring you keep enough money in your business to guard against future uncertainty. It is an unfortunate fact that mortgage lending has become more restricted for the self-employed, but a good broker should be able to introduce you to the right lenders and help you prepare the evidence that you’ll need. If you’re self-employed it is by no means as difficult to get a mortgage as some sectors of the media would have you believe, as long as you can clearly evidence your good financial position to the right lender.
For those relying on maintenance payments to fund a mortgage, prospects improve when you know where to look, and a good broker will again be able to help you find a lender with an appropriate product for you. Most will require there to be a court order in place before they lend, and some require evidence that maintenance has been paid for a certain number of months, but it really depends on your individual circumstances. It is often possible to get a loan for half the value of a property based on a decent level of maintenance, sometimes slightly more.
People often ask me what difference age makes to your ability to get a mortgage. This can indeed be a factor in affordability, as due to restrictions from the regulator most lenders are unwilling to go beyond the age of 65, or at a push, 70, in a mortgage term, and a shorter term means higher payments for the same loan. This is another case where a broker may be able to introduce you to a lender who is sympathetic to your particular circumstances and can offer something a little different from the standard products you might find on the high street.
I’ve worked with clients in changing circumstances for many years, and the best outcomes have tended to come where people engage in the collaborative law process in order to get a 360 degree view of the available options. Where mortgage lending is concerned, there’s a lot to be said for putting your cards on the table and discussing your resources together with your legal advisers, so that the best possible solution can be found for everyone involved.