Sadly divorce is on the rise and with this stressful time, inevitably property and mortgages raise their own issues with single parent mortgages becoming very much the norm. Official figures from the Office for National Statistics (ONS), show that divorce rates have risen in the last few years, following the Covid-19 pandemic. In 2021, there were 113,505 divorces granted in England and Wales, a 9.6 per cent increase compared with 2020 when there were 103,592 divorces.
This rise may be in part due to the no-fault divorce bill which was introduced last April, allowing married couples to divorce without attributing blame to the other party. Either way, the emotional side of separation comes with a financial, practical element which has to be addressed. Our latest article looks at single parent mortgage advice and the options out there to navigate this stressful time.
Mortgage affordability as a single parent
Perhaps the biggest factor in getting a mortgage as a single parent is meeting a lenders affordability criteria. It’s common for single parents to either work part-time or have a low income due to parental responsibilities. As a result, the amount you can borrow may be limited.
Most lenders will lend between three to five times your annual income. This figure reduces with the more children you have. This is because a higher number of dependents will often mean an increase in your outgoings. As a result, lenders will minimise the amount they’d be willing to lend to ensure the mortgage is affordable.
Using child benefit and tax credits towards your application
As a single parent, you’re able to use the following when documenting your income:
- Child benefit payments
- Tax credits
- Maintenance payments (from an ex-partner)
- Income from a job (full-time or part-time)
- Universal Credit
Guarantor Mortgages
A guarantor mortgage is one where someone else uses their own home as security on your mortgage, making them liable to pay any mortgage repayments on your behalf if you can’t. It is vitally important that you know that you will be completely able to make the repayments as it could put your relationship at considerable strain if you don’t.
Guarantor mortgages do have some advantages regarding a deposit, however, will many lenders will happy lend you 100% of your house value with one in place.
Joint Borrower Sole Proprietor Mortgages
A joint borrower sole proprietor mortgage is a mortgage where the home buyer can add either a family member or friend’s income onto their mortgage application. This specialist mortgage is a way for a family member or friend to help a buyer increase their affordability, without handing over any cash
Joint Borrower, Sole Proprietor is a type of mortgage where not all parties to the mortgage are legal owners of the property. For example, if there are two borrowers in the scenario both will be mortgage borrowers, but only one will be named on the title of the property.
Shared ownership
If you can’t afford to buy a home outright but want to get your foot on the ladder then shared ownership could be an option. Under the shared ownership scheme you buy an initial share in a property – normally between 25-75% – and pay rent on the remainder. Shared ownership is more affordable as you need a smaller deposit and mortgage, and you have the option to increase your share over time until you own the property outright if you want to.
There’s no such thing as a specialist single parent mortgage, but there are plenty of mortgage deals available to a single parent. For further information on single parent mortgage advice, please contact us here.
