In this interview with financial advisor Sheila Bailey of Willow Private Finance – in my role as the Suzy Miller of Alternative Divorce Guide asked Sheila how to get approved for a mortgage post divorce.
“Are the new mortgage rules going to make life even harder for separating families, trying to buy new homes on stretched incomes”?
New mortgage rules have come into force – will it make it harder for you to get a mortgage? How to get approved for a mortgage?
“When starting over from divorce, buying a new home is often part of that process, but will these new rules make it harder?
As of the 26th April 2014 new rules regarding affording your mortgage have come into effect. This means that we will have to prove to lenders that you can afford your mortgage now and if interest rates were to increase. Financial advisors will usually take into account your affordability in the future to ensure that you are able to remain in your home.
The new rules are designed to stop home owners from over stretching their incomes. The new rules will ensure that anyone buying a new home can not only afford the initial cost but also the cost if interest rates were to increase. During an application financial advisors will continue to use each lenders affordability criteria to ensure that you can maintain your payments. The criteria will include the cost of potential higher interest rates.
The Money Advice Service published their survey findings on 3rd April 2014 suggesting that three in four first time buyers admitted to over stretching their budget, because they had “fallen in love” with their dream home.
They also found that more than half said that the total bill for buying their home was almost £1,300 more than originally budgeted for. Again more than half of the first time buyers asked said that the day to day maintenance and bills turned out to be more than expected.
Make sure you explore and discuss in full the cost of buying your new home and the day to day running and complete a comprehensive budget planner to hopefully eliminate any surprises, in either area.
Changes in the information required by lenders:
There has been some press reports that lenders will now require more evidence for incomes etc. However, some advisors will always ask that you provide 3 months payslips if employed or 3 years signed trading accounts and SA302’s; 3 months full personal bank statements; and of course a fully completed budget planner.
All of these requirements have previously been as standard and will continue to be so (unless the lender requires any further evidence).
When you meet with your financial advisor do remember to discuss the “what ifs” with them. For example what if you lose your job, were to be unwell, have children or get divorced. This will help you and them to ensure that you can afford your mortgage not only now but also in the future.
Remortgaging:
If you are looking to remortgage, you will need to meet the lenders affordability criteria. However, this has always been the case and you could still potentially save money by moving lenders.
Suzy Miller of The Alternative Divorce
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE SOME FORMS OF MORTGAGES.