Will a divorce affect my mortgage application?

There’s no getting around it. A divorce will seriously impact your financial situation. Lenders will always take this into account when assessing whether you can afford your mortgage repayments.

There is likely to be a lot of uncertainty surrounding your finances during the divorce process, and until your financial future becomes more certain, it could be difficult to get approval for a mortgage.

It’s common that the terms of a divorce will have to be finalised before a lender will approve your mortgage application.

However, once you can prove that you’ll be able to afford post-divorce mortgage repayments, there is little else stopping your application from being approved.

Changes to your income

Mortgage lenders will want to see proof of your post-divorce income before approving your mortgage.

If you’re being assessed as an individual, rather than as a couple, this is likely to reduce the size of the mortgage you’ll be eligible for.

Lenders will want to know details of any child maintenance payments – or other regular payments exchanged between spouses – before approving your mortgage.

The amount of money you have available for a mortgage deposit will be affected by the results of your divorce settlement, so it’s likely this will need to be confirmed before your mortgage can be approved.

What happens to the marital home after divorce?

After a divorce, it’s inevitable that one half of the couple will move out of the marital home.

As such, they’ll need to work out what changes will be made (if any) to the joint mortgage.

There are three main options:

• The person remaining in the house remortgages, removing their ex-spouse from the deed.
• The marital home is sold and both spouses seek new mortgages.
• Both spouses keep their name on the mortgage and remain equally responsible for the repayments.

Lenders will typically require evidence of what is happening to the marital home before offering divorcees a new mortgage.

Financial links with your ex-spouse

It’s likely that you’ll still be financially linked with your ex-spouse long after you’re divorced.

If you applied for any financial product jointly, both of your credit scores will continue to be considered when you apply for a mortgage, even if you apply individually.

If your ex-spouse has a worse credit score than yours, it could be worth cancelling or settling the debt on these products. Only at this point will the financial link with your ex-spouse be voided.

This can be complicated though, as it requires the co-operation of your ex-spouse, who could benefit from remaining financially connected to someone with a better credit score.

Using a mortgage adviser after divorce

Getting divorced and applying for a mortgage are regularly cited among life’s most stressful experiences. Sadly, going through one tends to make the other more difficult.

That’s why it’s often recommended to enlist the assistance of a mortgage adviser when searching for a post-divorce mortgage.

These professionals will be able to suggest the mortgage products you’re most likely to be approved for, so you can secure a great deal without any hassle.

Tips to increase your chances of mortgage approval

• Build your credit score. Start paying off debts in a timely manner to build your credit score. The higher your score, the better deals you’ll be able to access. This applies to all debts and utility bills.
• Never miss a repayment. Always pay your credit card bill on time. Ideally, you can pay it off in full each month.
• Pay off your debts in full. The lower your debt-to-income ratio, the more likely you’ll be approved for a mortgage.
• Don’t make applications for credit in the months leading up to your mortgage application. Every time you apply for a financial product, the lender will run a credit check on you. This produces a short-term drop in your credit score. Too many of these could harm your chances of being approved for a mortgage.
• Close all unused credit cards. Lenders can be put off if you have too much access to credit.

• Fix your credit history. An imperfect credit record can have a detrimental effect on your borrowing power, so check to see whether you can fix any mistakes or black marks on your credit record.
• Consider using specialist mortgage lenders. There are mortgage lenders that specialise in offering deals to applicants with poor credit scores. These companies offer far higher rates than traditional lenders though.
• Talk to a mortgage broker. A mortgage broker can help you find a home loan that matches all your requirements. Tell your broker about your debts and they’ll be able to offer advice on the most suitable lenders as well as on how you can structure your application to give you the best chance of being approved.