During the pandemic, brokers anecdotally reported an increase in divorce-related enquiries, especially after the first lockdown, as the pandemic meant couples were isolated together for long periods of time which placed pressure on relationships.
However, brokers have said that in the past few months divorce-related enquiries had also risen, whether that is to remortgage to buy out partners, mortgage to purchase another property, remortgage to cover case settlements, single parent mortgages or joint borrower sole proprietor (JBSP) mortgages where a family member supports someone who is getting divorced.
The most recent statistics from Family Court state that there were 26,301 divorce petitions made during April and June this year, up seven per cent from the same period last year. Around 30,645 decree absolutes granted in the same period an increase of 23 per cent compared to the same quarter in 2020.
Chris Sykes, associate director and mortgage consultant at Private Finance, said that in the past two months the firm had seen “huge increases” in such enquiries.
Sarah Tucker, managing director of The Mortgage Mum, added that since lockdown measures were lifted there had been a big rise in divorce-related mortgage enquiries, specifically single-parent mortgages. She noted that in August 80 per cent of its enquiries were around single-parent mortgages.
Jennie Delelis, mortgage and insurance adviser and financial planner at Evolution Financial Planning, also said she had seen an jump in such enquiries recently, pointing to pressure from the pandemic and financial pressure as possible catalysts.
Challenges around financial commitments
Sykes said the fact the transaction may be divorce-related would have much bearing on a lender’s decision making, but “all the factors need to fit”.
He explained: “If there are child or spousal maintenance agreements, or agreements to pay school fees then this all needs to be considered. If there is going to be a marital home in the background commitments like a mortgage around this property will need to be taken into account.”
He added that if the transaction was still affordable it would most likely be fine, but loan to value limits or lenders available on purchase may be impacted, especially if someone already has a property in the background that was the marital home.
David Hollingworth, associate director of communications for L&C Mortgages said the breakdown of a relationship would most likely have “financial implication for both parties”.
He said: “There can often be a desire to retain the family home so that upheaval for a family is reduced to a degree, but that may not always be possible. Buying out the other partner’s share can be difficult especially where the borrowing had been based on income that was unevenly distributed between the two.
“If the main earner is moving out, then to put the property into the remaining partner’s name would mean the mortgage lender will have to see enough income to continue to support and potentially increase the mortgage to enable the buyout.”
He added that maintenance payments would then be “critical for affordability purposes” and lenders had “varying approaches”.
Hollingworth also explained that previously, the only way for maintenance payments to be included into affordability was by court order, but said lenders now had a more “flexible approach” to evidence maintenance income.
This could be done via a solicitor’s letter or by showing a track record of payments. Typically three to six months’ track record may be required.
Hollingworth added that another “stumbling block” was the duration of maintenance payments.
He explained: “By their nature, they will be for the benefit of the children and if the maintenance payments will stop within a few years then a lender may struggle to factor those payments in as adequate support for affordability.
“There are also now more lenders that will accept 100 per cent of the maintenance income but some may still only accept a proportion, so that could affect lender choice too.”
Sykes added that Private Finance had previously suggested to clients that they can “bolster their affordability” and “add a lot of borrowing power” by opting for a lump sum for maintenance payments rather than monthly commitments.
Joint borrower sole proprietor popular for newly-divorced
Tucker said lenders were happy to support single parents and borrowers, but it all came down to affordability.
She explained that often clients relied on family members to support newly-divorced applications, and this could be done with a JBSP mortgage, which she said had become “hugely popular” in the last two years.
Tucker said: “It gives our clients the chance to start fresh and work towards borrowing on their own in the future. It becomes hugely important to newly divorced clients to break away financially from their ex-partner, and I get that.
“Our job is to make sure they do this when the time is right and knowing they can afford it. JBSP allows us to give more people this option and freedom.”
Broker and solicitor advice vital
Brokers agreed that it was important to seek advice from a solicitor and a broker early in the process who can help you navigate the process.
Sykes said: “Seek advice early on in the process is the ideal, we can make sure a client is fully informed of their options and it could affect the process of divorce itself.
This was echoed by Delelis who added that seeking the advice of a solicitor if mediation hasn’t worked would help settle on a plan agreeable to both parties regarding children and assets.
She said: “Unless, they have a clear idea of settlement and what that might look like after the divorce is final, it’s going to be difficult to plan. Lenders want facts, which are sometimes impossible to provide until we know what their financial circumstances will be like post-divorce, if not already financially independent. After that, normal affordability processes apply.”
Tucker added: “Our advice to those who are wondering what their options are after a breakup, is to speak to a broker you trust, someone you can speak openly with, and someone who is going to hold space for you to navigate this situation with empathy. Emotions are high, and you may not be thinking logically at first.”