Mortgage Adviser Advice - Your marital status and your Mortgage
Most long-term commitments that we have to make in our lives are going to be pretty important. So, what happens if we have to balance two long-term commitments such as marriage and a mortgage simultaneously? Read on and find out.
While you probably think that your marriage is the biggest relationship you’ve had to think about in recent memory, the truth is it shouldn’t be the only one. The connection between money and marriage, particularly its effect on your mortgage, should be something that you pay careful consideration towards.
Most mortgage advisers will tell you that your relationship status will have a lasting impact on your mortgage application. Depending on whether you are single, in a relationship, married or divorced. Let’s find out exactly how with advice from one of our Mortgage Advisers.
Mortgage Adviser Advice
What happens if you’re single?
The great thing about being single is that you’ll be able to make your own choices. This’ll mean you’ll be solely taking into account your finances and your choice of house when you’re starting your mortgage application. What’s great as well is that the mortgage lenders won’t begrudge anyone who is only buying a house for themselves. This means that lenders will still conduct the same affordability checks that they would to anyone who would be moving into a home under a joint mortgage. This will involve checking your salary, outgoings and your credit score before ultimately deciding whether the lender will let you borrow from them.
However, this does have its downsides. Most mortgage advisers will inform you that the likelihood of a single person maintaining a double-income household is rather low. Especially if they are at the beginning of their professional career. Sadly this means that unless your income is particularly high then the amount that you will be able to borrow from your lender may not be enough to get you the house that you truly desire.
This is because lenders typically let you borrow between four to five times your annual income. This means that as a single homeowner your options will be limited, as it will only take your earnings into account. Also, because you are on your own, 100% of household expences will be deducted from your income when a lender is calculating your affordability figures. This contrasts to joint mortgages where lenders make estimations based on the total income of the homeowners & housing expences are split between all applicants.
What if you’re married or in a partnership?
While being married or in a partnership doesn’t provide you with any mortgage deal guarantees, a lot of mortgage advisers will tell you that it makes the process a tad easier. Of course, this will only really work if both of you have an income, as it will help your eligibility for more desirable deals and mortgage amounts. If one of you doesn't have an income then this actually works against you as the non-employed is catagorised as a dependent &, as such a monthly deduction is removed from your income to cover the cost of the second applicant.
A joint mortgage will also help you to erase any outstanding debts that you might have as well. But as we’ve already pointed out, this will only really be the case if BOTH of you have a decent income. Why you might ask? Well, although you may be married, your ability to get a mortgage will still be dependent on the factors making up your affordability assessment. So that means any outlying debt that you have, how much money you earn between you and your partner and your credit score. This means that should one of you not have any of these bases covered, it can make your mortgage much more difficult to get approved. If you’re reading this and think this is a problem that you might have to face in the future then don’t worry, we’ve got your back.
So, what if you’re trying to get a mortgage but your spouse has a poor credit rating?
While you or your spouse having a poor credit rating doesn’t make life much easier for yourselves, it’s 100% a problem that you can work with. While this might seem odd, mortgage advisers tend to advise that you leave the spouse with a poor credit rating off of the mortgage application. This is because, when you apply for a mortgage as a married couple lenders tend to look at the worst credit score of the two. Therefore, if it’s just one partner putting down their name on the mortgage application then you can avoid this problem altogether. Great!
Though, it’s not all great. If there’s only one of you putting down their name on the mortgage application then you may have to look at buying a less expensive home than you originally planned. This is because lenders will only be taking into account the finances of the person whose name is on the mortgage application into account.
Alternatively, you may want to opt for a bad credit mortgage. Though be warned. These often have higher interest rates and monthly payments to mitigate the risk of lending money to someone with a poor credit score.
What if you’re looking at a divorce?
Going through a divorce is a stressful ordeal. So it’s important that you know how it may affect your mortgage. And while it might seem the easiest way of doing things, doing a straight 50-50 split of the property can be damaging to the credit scores of both ex-spouses.
This is why lots of mortgage advisers including us would advise you to hire a property solicitor to create a plan for you to avoid this situation. If you’re thinking of buying a new house already we’d also suggest that you have your ex-marital home sold first. This is because it can be very tricky for lenders to grant you a second mortgage if you still have to make repayments on your old home.
If you’ve got any more questions or queries then make sure you check out some of the other articles on our site. We’re a mortgage advisor that can help you through your mortgage woes all at the price of £0. So, get in touch!
At MO we have tonnes of resources on all things mortgages. Everything from guides for first time buyers, types of mortgages, mortgage advice, information on stamp duty, finding the right mortgage brokers, self employed mortgages and so much more. All for free, no credit card needed! Click to our Articles section to find out all you need to know about mortgages.