"I can’t help wondering if perhaps this specific area of the market may need a rethink, as this currently underserved demographic could perhaps benefit from specialist products"
But it’s not just the legal side of things with regards divorce that is potentially ripe for a rethink. I receive quite a few referrals from a family law specialist, who regularly recommends me to their clients once the inevitable discussions around finances start. Sadly, by that stage, it’s normally left to me to run through the complexities of how mortgages work for those separating from a partner, whereby they will be paying their ex-spouse maintenance for any children and also have to make provision for their property, whilst also trying to buy something for themselves to live in.
Once my clients have (normally) picked themselves up off the floor after I’ve explained the complexities surrounding SDLT for couples who are separating and divorcing, and that they will need to apply for an exemption in respect of additional Stamp Duty, which means unless granted, they may have to pay the additional surcharge – still one of the most unfair applications of this tax, I believe – we then have to run through their mortgage fact find and affordability checks. Which is where those who are having to pay child maintenance or spousal support come down to earth with even more of a bump. Because it’s then that they realise just how difficult it’s going to be to get another mortgage, due to the fact that most lenders include these outgoing in mortgage affordability tests. On the other side of the coin, I’ve lost count of the amount of tissues I’ve dispensed when trying to explain to an understandably upset third party that being a stay-at-home parent with little income other than maintenance from their ex together with Child Tax Credit, means that the chances of being able to secure a mortgage are slim, even though they have the buffer of a decent amount of equity from their settlement.
Now, I’m not for one minute suggesting that anyone contemplating separation from their partner or spouse shouldn’t get legal advice with regards their rights – particularly if there are children involved. However, what I am suggesting is that before anyone considering such a life-changing decision goes to see a divorce lawyer, they perhaps seek advice with regards the mortgage element of their arrangements in the first instance to get a good understanding of what may be possible before starting the process, or perhaps even having ‘that’ the conversation with their soon-to-be-ex. Forewarned is forearmed, as they say...
Whether its providing practical advice in terms of how the beneficiaries of protection policies may need to be changed (to avoid being the most generous ex husband or wife ever) looking at what sort of cash may be required to purchase another property whilst contributing to payments on the marital home, or taking into account any redemption penalties that may have to be paid if a property is sold so that both parties can start afresh, along with legal fees and estate agent fees to ensure that there is a more realistic understanding of ‘what might be left over’, these are all conversations that it’s better to have before things get emotionally charged, so that a clear-headed approach can be taken.
Of course, no one goes into a relationship thinking it’s going to fail, and yet it does sadly seem to be the reality that many relationships and marriages do, often with devastating financial consequences. Whilst lenders, understandably, wish to mitigate risk and lend responsibly to all their clients, I can’t help wondering if perhaps this specific area of the market may need a rethink, as this currently underserved demographic could perhaps benefit from specialist products, or at least a slightly more pragmatic underwriting criteria, to help those who are having to start again, perhaps in their late forties or fifties, to maximise the opportunity to regain some equity in a property and get back on the property ladder after separation or divorce.
After all, if the Ministry of Justice can move with the times surely, we can too?
