In this interesting post we look at how divorce and separation affect your mortgage.
Manchester Mortgages received a call from an existing client of 9 years.
Our client was separated from her husband pending legal divorce, was in her mid forties with no children and employed as a teacher with an income of just over £40,000 per year.
The martial home was in joint names with a joint mortgage outstanding of £140,000 with monthly repayments of £857 per month.
Our client wished to buy out her husband’s share ( known as equity ) of the house they once shared ( he was living elsewhere ) which was agreed at between £30,000 and £35,000 subject to the house being valued and to also to borrow an additional £10,000 for home improvements.
The client also wanted to reduce her monthly mortgage payments to around £ 650 per month.
The client’s mother was in a position to gift the required £ 25,000 / £ 30,000 to client to enable her to buy out her husband without having to add this amount to the mortgage.
Estate Agents valued the property if sold on the open market at £210,000
The client had a personal loan of £200 per month and £1,000 on a credit card with these commitments to remain outstanding.
For once there was not a problem obtaining the mortgage as our client had a clean credit history, a good income and moderate outgoings.
The main problem was agreeing the value of the property and therefore the amount to be paid to her soon to be divorced husband – when requiring a mortgage to purchase or re-mortgage a property it is the nominated lenders valuer who will place a value on the property which may agree with Estate Agents value or may be below this figure.
Lenders always lend on either the purchase price or valuation – whichever is the lower – the property value is determined by the lenders valuer not the Estate Agent, Client or third party.
The lenders nominated valuer valued the property at £200,000 which both parties agreed with which meant the husband accepted a payment of £30,000
Our client obtained a re-mortgage of £150,000 with £140,000 being required to repay the existing joint mortgage and she received an additional £10,000 for the home improvements she wanted doing.
The chosen lender offered a 2 year fixed rate of 1.79% along with no lender arrangement fees, a free valuation, free legal services ( however due to change of names on property solicitors will charge approx £300 to register property in clients sole name at The Land Registry ).
By extending the term of the mortgage to 24 years the monthly payments were reduced to £640 per month which was within clients budget.
Our client now owns the property in her own name and is the process of having the home improvements done.
Her husband has had his name removed from the joint mortgage and with the £30,000 equity settlement bought a property in his own name for which he used Manchester Mortgages to arrange his mortgage.
Divorce and separation cause financial problems and stress – let Manchester Mortgages take the strain – whatever your circumstances please contact us on 0161 706 0242 to discuss your requirements.