Within divorce proceedings the court has power to make orders about the family home or any other property you or your spouse own. The Court cannot order a lender to lend you more money, but a properly drafted court order and careful preparation in the run-up to applying for a new mortgage can maximise your borrowing power.
When you and your spouse bought your house together you were given a mortgage on the basis of your joint income, or the income of the higher earner. The problem arises when you separate and a new mortgage is based on your income alone.
It is quite typical for a wife to to be the one who works part-time whilst bringing up the children and for ease of reference I have assumed here that the wife is the lower earner although I recognise that is not always the case.
The court can order that the wife stays in the family home and that it is sold at a given point in the future, or can order an immediate sale. In the first scenario where the wife stays in the home the court can order that the title to the house is transferred into the wife’s sole name but the mortgage stays in joint names and the wife indemnifies the husband.
From the husband’s point of view this is far from ideal because his ability to raise a mortgage is hampered by him remaining liable under the joint mortgage. A husband in this situation should ask an independent mortgage broker what lenders will take the wife’s indemnity into account when considering how much he can borrow.
Alternatively, the wife may want to buy out the husband’s interest in the house to avoid a later sale, or she may need to move to a more affordable house. To do this she will need to maximise her mortgage raising capacity. Some lenders such as Nationwide and NatWest will take into account maintenance and benefit payments when calculating the wife’s income.
Mortgage raising capacity
A wife should consult an independent mortgage broker as soon as possible to find out what her maximum mortgage raising capacity is and what she needs to do to maximise it. For example, some lenders will take maintenance into account but only where a husband has been regularly paying maintenance into a wife’s bank account (not into a joint account). Other lenders require maintenance to be court ordered.
It is crucial that you do not allow yourself or your spouse to fall into arrears with the mortgage or on other contractual payments so you can both maximise your mortgage raising capacities. In addition to consulting an independent mortgage broker at the earliest possible stage, you should also take legal advice.
Without a court order a lender will not agree to a house being transferred from joint names into a sole name whilst in joint names. A court order within your divorce may allow you to approach a greater number of lenders and get a better mortgage deal. This can make all the difference when you and your ex are trying to create two households out of one and keep your monthly payments down.
At Neves we offer an initial fixed fee meeting where we consider with you what your priorities are. We can then consider with you your options, what would be a reasonable financial outcome for you, and what steps you should take to protect yourself in the short term.
If you would like to find out more please get in touch with the family department.