Introduction
The complex nature of mortgage capacity assessments during a divorce settlement can be quite frustrating. I have put together this guide to help you explore various types of assessments tailored to different circumstances, helping you understand the options available and empowering you to negotiate effectively for the best outcome. I'm going to talk through the various types of mortgage capacity assessments available to help highlight the best type of assessment for you in order to negotiate the right divorce settlement.
So, let's look at number one, our standard mortgage capacity report. And this is really the foundation for all of our reports. And as standard you will find details of likely maximum borrowing as well as affordable borrowing. Details of cost will be included as well as any other information that I think is important associated with the assessment and my findings.
Discover Your Maximum Mortgage Capacity
The first figure you will find in the report is the maximum borrowing figure. And this is formulated by contacting a range of lenders currently active in the marketplace. Checks are made to ensure the financial details of the assessment fit within the various lenders criteria, and any available affordability calculations are carried out. Typically between 10 and 20 different lenders are contacted and generally the more complex the case or the more inconsistent the results of the research are, then the more lenders that will be contacted. And based on the results of this research, along with our experience with the various mortgage lenders, the likely maximum mortgage borrowing figure is determined.
Explaining Mortgage Costs: Monthly Payments and Fees
Details of costs for this maximum mortgage amount will then be confirmed and this is in the form of example mortgage illustrations. The illustrations will include example monthly payments, along with lending fees which might include valuation and product costs. And in some instances potential stamp duty land tax may also be confirmed. There are usually two illustrations provided, one will be based on a fixed rate mortgage, which is where the interest rate payable on the mortgage is fixed and will not change for a period of time, along with an illustration of a tracker rate, which is where the interest rate payable can fluctuate over the course of the mortgage.
For example, you might pay 1% plus the Bank of England base rate at 0.75, giving you a rate payable of 1.75. However, if the Bank of England base rate changes, the interest rate payable will also change. And although the illustration provided will be established using current interest rates, which are likely to change in the future, they do give a good indication of whether the maximum borrowing is likely to be affordable. So, this moves us on to the affordable borrowing amount. And this is calculated by firstly comparing the monthly income provided by the individual with their monthly outgoings, which gives us an estimate of their disposable income. If the disposable income is less than what would be required to pay the monthly mortgage payments, then the maximum lending amount is deemed as unaffordable.
Simplify Your Mortgage Assessment
If this is the case an alternative affordable lending amount will also be calculated and confirmed within the assessments. And as mentioned earlier, any important notes will be detailed within the assessment and this may include any criteria that is important to the case, which might affect the individual now or in the future. It might also provide an explanation to the results of the assessment. Our standard assessments can be supplemented by additional alternative scenarios. And this brings us to our assessment number two, mortgage capacity assessment with additional scenarios. And this is where the reports can be expanded by exploring how changes in circumstances might affect mortgage borrowing, whether they are a reality or yet to be agreed upon.
Our reports can include any number of additional scenarios and examples of how these might be used, but not restricted to will be discussed in other articles so please watch out for those if you're interested. And they may include, considering how varying amounts of maintenance income will affect capacity to mortgage, considering how varying amounts of deposit towards the purchase of a new property might affect borrowing, which in turn can help to highlight how best to split assets.
Changes in income can be explored, which might include benefit entitlement as living situations change. Essentially, any change in financial circumstances that may affect borrowing can be explored and detailed within an assessment. Now, assessment number three, which is our joint mortgage capacity assessment, and these are based on our standard assessment, however, instead of being used for one individual or party in the divorce, the report can provide capacity details for two or more parties within one report. And the parties in these cases are usually a divorcing couple. However, I have produced reports for a divorcing couple plus their respective new partners. If everyone concerned can agree to share their personal and financial information, then any number of individuals can be assessed and there are many advantages of instructing a joint assessment and they include, a cost saving element as joint reports are offered at a discounted rate.
Benefits of a Single Expert and No Mortgage Capacity Assessment
There's also an element of transparency between parties which will help to prevent disputes over certain details of the divorce or separation. And using one expert provides a single point of contact and eases the process of obtaining this information. Finally, we come to assessment number four, which is the no mortgage capacity assessment. And this is our latest addition to the range of assessments we provide. And it's essentially for individuals whose circumstances dictate that they are not in a position to obtain lending whatsoever. These reports are offered at a discounted rate and the type of circumstances eligible for this type of report might include the following.
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Someone who is unemployed, an individual who has a history of bankruptcy or other credit issues such as county court judgments, IVAs, or debt management plans. Age might be an issue for example, if an individual is approaching retirement age and has little or no retirement income, or perhaps they've already retired. It could also be used by an individual whose income is quite obviously insufficient to support a mortgage. Perhaps they have low income, many financial dependents, or a high amount of debt.
Frequently Asked Questions (FAQ"s)
What types of mortgage capacity assessments are available?
We offer four main types of assessments tailored to different circumstances: Standard Mortgage Capacity Assessment, Mortgage Capacity Assessment with Additional Scenarios, Joint Mortgage Capacity Assessment, and No Mortgage Capacity Assessment.
How is the maximum borrowing figure determined?
The maximum borrowing figure is calculated by contacting a range of lenders to ensure it fits within their criteria. Typically, 10 to 20 lenders are contacted, and the figure is determined based on research results and our experience with mortgage lenders.
What information is included in the assessment regarding costs?
The assessment includes details of costs for the maximum mortgage amount, such as example monthly payments, lending fees, and potential stamp duty land tax. Illustrations of fixed rate and tracker rate mortgages are provided.
How is affordable borrowing calculated?
Affordable borrowing is determined by comparing the individual's monthly income with their monthly outgoings to estimate disposable income. If disposable income is insufficient to cover monthly mortgage payments, an alternative affordable lending amount is calculated.
What additional scenarios can be explored in the assessment?
Additional scenarios may include variations in maintenance income, deposit amounts for property purchase, and changes in income or benefit entitlement. These scenarios help highlight the best options for splitting assets.
What are the benefits of a joint mortgage capacity assessment?
Joint assessments provide capacity details for multiple parties within one report, promoting transparency and preventing disputes. They also offer cost-saving benefits and streamline the information-gathering process with a single point of contact.
Who is eligible for a no mortgage capacity assessment?
Individuals who are unemployed, have a history of bankruptcy or credit issues, are approaching retirement age with little to no retirement income, or have insufficient income to support a mortgage may be eligible for a no mortgage capacity assessment.