Trying to get a mortgage as a single parent? Here are five common questions answered

Are you weighing up your housing options if you leave your partner, or already hunting for a new home as a single parent? Here are five common solo mortgage questions answered.

According to data released by the Office for National Statistics, divorce rates declined by 4.5% during 2020 – defying predictions that divorce rates would rise due to tighter closeness as a result of lockdown regulations.

However, we won’t get a whole picture of the pandemic’s impact on relationships until data from 2021 and 2022 is available. And anecdotally, mortgage brokers say they are already seeing an increase in divorce-related enquiries. So it looks like there may be more newly single parents house-hunting in the near future.

If you are now finding yourself suddenly single again, you may be shopping around for a mortgage for your new, solo home… and finding it harder than you expected.

Divorcees and single parents often face difficulties in obtaining mortgage approval, and it’s important to understand your options and arm yourself with knowledge. So if you’re considering your housing options, Paul Coss, co-founder of mortgage brokers Haysto answers five common questions.

1) What happens to my joint mortgage if I’m divorced or a newly single parent?

Separations and divorces can be stressful, even more so if you need to sort out a joint mortgage. You have a few options for your mortgage when separating from an ex-partner.

Sell your home

If you sell your home you would no longer have any financial ties to each other. But it means both of you will need to find somewhere else to live. If both of you want to leave the house, but don’t want to give up ownership, then you could explore the option of renting it out. I

f you do this, either one or both of you can still own the home. If both of you want to still own the home, you’ll have to split the rent two ways, and you’ll still be on a joint mortgage with financial ties to each other. If just one of you wants to rent the property out, they’ll have to buy out the other from the mortgage. 

Buy out your ex

One of the most common choices is to have one partner buy the other out and transfer the joint mortgage to one person. The benefit of this option is that you get to keep your home, which could be a good idea if you’d struggle to get a mortgage on your own. Your mortgage payments wouldn’t be affected and you’d still have a joint mortgage.

If you both decide you want the mortgage to be transferred to one person, you can either stick with your current lender, or consider looking around for a new lender. The process of transferring a mortgage to one person usually involves an interview and consultation with a solicitor, and you might have to have your property revalued.

There’s likely to be admin and legal fees, and possibly stamp duty if you’re making a substantial payment to the other joint owner. 

Don’t forget you’re both liable for the mortgage 

Even if you’ve separated, you’ll both still need to make your mortgage payments until you reach an official agreement. If either of you misses a payment then it’ll bring down both of your credit scores. Separating from a partner can be a difficult process, but it’s important to keep on top of things while you’re still financially linked.

2) Can I get a mortgage as a divorcee or single parent?

Yes, you can get a mortgage as a single parent. Applying for a mortgage by yourself when you have little ones can feel overwhelming. Some high street lenders aren’t set up to deal with situations that aren’t straightforward, but there’s plenty of specialist mortgage lenders who could help. You won’t have the benefit of an extra income, so you’ll need to be able to prove you can afford the repayments by yourself.

If you’ve been renting, you’ll know all about the extra costs that come with being the only adult in a household. However, your monthly mortgage payments could be cheaper than your rent, so you might be able to save more money as a homeowner. Haysto’s Mortgage Payments Calculator can help you see what your mortgage repayments could look like.

3) How much can I borrow as a divorcee or single parent?

When deciding whether to give you a mortgage, lenders will check to see if you can afford the repayments without struggling. Different lenders have different lending criteria, but generally they’ll check:

  • Your income – the higher your income, the more you should be able to borrow.
  • Your credit report – a positive credit history will be more appealing to lenders.
  • Your deposit – putting down more money upfront means you’re asking to borrow less and could get the better deals.

4) What counts towards my income?

When mortgage lenders look at your application, they won’t just look at your salary. They’ll take other sources of income into account. This includes things like state benefits and child support payments from an ex-partner. All these sources add up, and could increase the amount you borrow.

Getting these presented properly in your application is really important. Lenders want to know you can afford your mortgage repayments without struggling. To do this, they’ll look at: your regular monthly outgoings, what you spend your money on, how much money you have spare after all your outgoings, and how much you’ve managed to save. In the months leading up to your application, you should try to get to grips with your finances so you look as good as possible to lenders. 

5) What are my mortgage options? 

Getting a mortgage as a divorcee or a single parent can feel like a scary prospect. While there aren’t any schemes dedicated specifically to divorcess or single parent mortgages, there are a number of ways you could still get on the property ladder.  

Shared Ownership

Shared Ownership is where you buy part of a property and rent the rest. You take out a mortgage on the part you’re buying, then pay a reduced rent on the part you don’t own. You can buy some or all of the remaining property share later on. Shared ownership can be a complicated process. So we’d recommend speaking to one of our Mortgage Experts. 

Help to Buy

Help to Buy is where the government grants you an equity loan to put towards the cost of a new-build home (up to 20% of the property price). You can get a Help to Buy mortgage with only a 5% deposit – a good option if you can’t save much money and want a brand new home. Read more in our Guide: Help to Buy Explained.

Right to Buy

If you’re currently a council tenant in England, you could qualify for the Right to Buy scheme If you meet the criteria, you’ll be able to buy your home at a discount. Most mortgage lenders will then accept your discount as a deposit. 

Guarantor mortgage

If you’re struggling to meet the affordability needed to be accepted, you could apply for a guarantor mortgage. A guarantor mortgage is where someone else agrees to pay for your mortgage in the event that you can’t. This means that you’re much more likely to be accepted for a mortgage and might be able to borrow more than you would on your own, or maybe qualify for lower interest rates.

Buy with family or friends

Buying a house with a friend or a family member is becoming a popular way to get on the property ladder. Combining deposits and sharing all the monthly living expenses can be  appealing. It’s a big commitment though. You’ll be jointly responsible for the mortgage payments. If one of you can’t pay, you’ll have to cover the cost. You also can’t sell the property unless everyone agrees.

Haysto specialise in helping people with complex situations that come from bad credit and self-employment secure mortgages. They take time to understand your unique situation, and find the right mortgage for you.

Photo by HiveBoxx