Coronavirus vs Mortgage Capacity Assessments:

How the virus is affecting your Divorce Negotiations 

As we all are aware of by now, Coronavirus is affecting every aspect of our life and for myself, as a Mortgage Capacity Expert, providing individuals going through divorce and separation with detailed and reliable information about their mortgage borrowing capabilities can be challenging.

Mortgage lenders are changing criteria regularly, trying to keep up with the everchanging economic landscape.

I will go into detail some of the changes we have already seen in the first 6 weeks of ‘lockdown’ as follows:

Furlough – For employees who have been furloughed, mortgage lenders will still consider them for borrowing but this is likely to be based on 80% of their salary only. Additional income such as shift, car or location allowances, overtime or commission may not be considered.

Mortgage Valuations – Due to Government guidelines on self-distancing, physical property valuations are no longer being carried out, meaning that you may not be able to get your property valued. Certain lenders are using Desktop or Remote valuations, however, working out how much your property is worth in order to calculate a divorce settlement is likely to be affected.

Deposit – Due to physical property valuations being placed on hold, some mortgage lenders are temporarily limiting all new purchase applications, and in some instances re-mortgage applications also, to 75% Loan to Value. This means that some lenders require a 25% deposit for any new property purchase. Other lenders are capping the amount they will consider lending based on the reason for the borrowing. For example, some lenders are reducing the maximum Loan to Value for any residential mortgage if the purpose of the loan is for debt consolidation. This means that should a mortgage be needed to pay off legal fees, loans, credit cards or another debt, some lenders will only agree to lend up to 80% of the property value.

However, despite the above uncertainties, mortgage capacity assessments can still help you overcome many of these issues. As a mortgage capacity expert, I can base my research and complete a report based on any financial circumstance, whether the situation is a reality or a potential future scenario, this may include:

  • Assuming furlough will end, using 100% of salary and all additional income to calculate borrowing. This will give individual’s the opportunity to prove their future mortgage borrowing capabilities, helping to negotiate their divorce settlement based on what their circumstances are likely to be once this short-term crisis has ended.
  • Assuming minimum deposits/equity requirements will increase to previous rates, instead of 25% which some lenders have currently adopted.
  • Maximum mortgage borrowing capacity can be confirmed based on varying property valuations.
  • In order to include all eventualities, comparative capacity to mortgage details can be provided, established using current, short-term, lending criteria and estimated future lending criteria.

Although the mortgage market is currently in a precarious position, there is still a lot that can be done, albeit cautiously, to solve any mortgage related queries.

If you are divorcing and need some help, support or advice regarding any of these issues, please call our expert, Natasha Palmer on 0800 6342 111