Some banks are said to be devising a new “divorce” mortgage for couples going through a divorce. The idea behind the mortgage would be that an individual would then be able to borrow enough money to buy their spouse out for a set period of time. A “divorce mortgage” would have the benefit of allowing one partner to stay put in the marital home, which would be especially beneficial where there are children involved.
There is some speculation that the new type of mortgage may be available before the end of the year.
The “divorce mortgage” would be available for all age groups. However, in recent years there has been a sharp increase in the number of people over 50 getting divorced and this age group now accounts for the largest increase in the divorce rate. As there is an increase in the number of older people are getting divorce more problems with home ownership and mortgages moving forward are appearing; especially as banks are less likely to lend to older borrowers under the current system due to fear the mortgage will not be repaid.
Research from the building society, Nationwide has shown that almost 30% of divorcing couples end up selling their family home as one party cannot afford to meet the cost of the mortgage on their own. This is because when the mortgage was taken on it was often on the basis of two incomes. Even when one party can afford to stay in the home they will often have to buy the other party out leading to even greater financial strain. In addition, the level of the deposit required by the lender is bigger (typically around 25%) if one of the parties wishes to stay in the marital home.
It can also be harder for couples who seek to reach an agreement without going through Court as the person staying put, who is typically the wife, may have to rely on maintenance payments from the other party in order to meet the mortgage payments and lenders will often not accept anything other than a Court order stipulating such payments when considering a potential borrowers financial position.
Ray Boulger from mortgage broker John Charcoal said; “A lot of people have no choice but to move out after a divorce or separation, which can cause extra upset and disruption for the children. If banks can find a viable way to prevent this happening – that would be beneficial for both parents and the children – it would make sense.”
Samantha Lee, Managing Director and Head of Family Law at Swain & Co Solicitors says, “Making decisions about the property is often one of the biggest issues in financial proceedings. It is welcome news that lenders are looking at ways to address the affordability of property question which can cause so many problems for couples on divorce.”
If you have any questions about your property or any other financial matters following separation or divorce, contact our family team today on 02392 492 967.
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