Affording your home solo after a divorce
Every January, lawyers in the UK gear up for a peculiar natural phenomenon. Like other seasonal patterns, such as birds migrating south for the winter, this phenomenon is as reliable as it is mythic.
It is – drumroll – a measurable uptick in the number of divorce enquiries.
It’s hard to say what breaks the proverbial camel’s back each December. Maybe it’s one final unbearable holiday with the in-laws. Maybe it’s a really crappy Christmas gift. Maybe it’s falling in love under the mistletoe – with someone else.
Regardless, come the 1st of January, the flurry of enquiries begins, and by the 1st of March, formal proceedings kick off in numbers.
But this year, the January jump in divorce enquiries coincided with another major trend: a historic cost of living crisis.
The result? Lots of people want a divorce, but many can’t afford it.
According to recent research by Legal & General, 272,000 people have decided to postpone their split indefinitely because of cost of living concerns.
The cost of living crisis is delaying divorces
Even without this historic economic turmoil, getting a divorce can be expensive. Really expensive.
The average cost of an uncontested divorce in the UK is between £500 and £1,500. The cost of a contested divorce – one where you might need to go to court – falls between £2,000 and £30,000 or more.
And at the centre of many contested divorces are financial assets – especially the family home.
This goes without saying, but that property isn’t just an asset. It's a home – sometimes with years of happy memories and comfort embedded within its walls. If children are involved, the pressure to hang on to the family home can be even greater.
Regardless (and possible acrimony aside), keeping the home after a divorce can be untenable. One spouse may not be able to afford the mortgage on their own, or they may be unable to buy out their ex’s share of the property.
This can add more heartache to an already difficult situation.
But there’s a shred of good news: now, there are options that may work for homeowners looking for alternative ways to fund the solo ownership of their family home without sacrificing anyone’s equity.
Owning a home in new ways
As homeownership has moved out of reach for more people, the arrangement that homeownership commonly takes has begun to morph.
Year-on-year, we’ve seen more and more mortgages with parents, grandparents, aunts, uncles, siblings and friends tacked on – all to increase how much a buyer can borrow. Borrowing more can mean being able to afford a home – or a bigger home, or a nicer home, etc. – or the home you already live in, just on a solo income.
We launched our income booster with the intention of supporting first-time buyers. Typically, an aspiring homeowner in their early twenties (though increasingly, in their early thirties… Thanks for that, housing crisis!) would save up a deposit and ask mum or dad to go on their mortgage with them.
Mum would be liable for the mortgage and her income would increase the amount we could lend, allowing the buyer to afford their first home. It’s a tidy system that works for a lot of people.
But the perception that income boosters are only for first-time buyers is a harmful one. In this housing market, all kinds of homeowners need support, and there's no shame in that.
This is why we’re glad to see that increasingly, the income booster is finding a new audience in seasoned homeowners who are going through a serious life change, like a divorce.
The result? The ex is out and you get to stay in the home you love with the support of someone who cares about you.
Income booster: not just for first-time buyers
Most couples preparing to divorce will have explored a remortgage with an equity release, where the spouse moving out of the home could be removed as an owner and paid out for their portion of ownership.
But releasing equity means increasing the mortgage loan amount for the spouse staying in the home. If that increase makes the mortgage unaffordable for the spouse keeping the home, they could add an income booster to help close the gap.
This could be mum, dad, a sibling – any close relative. Everyone would need to pass our affordability checks for the Gen H mortgage, and would be liable for the mortgage.
But this bit is important: the income booster doesn’t have to contribute any money toward the mortgage unless the owner stops paying (which… don’t do that. It’s bad for everyone.).
The result? The ex is out and you get to stay in the home you love with the support of someone who cares about you. It can be a great way to add support and stability to a period of massive life change.
But there are other options, too.
For example, if a divorce is amicable, the spouse moving out of the family home may be able to stay on the mortgage and retain their equity stake as an income booster.
If this option were appropriate, you may be able to remortgage the property to remove your spouse from the property deeds but keep them on the mortgage. They’d no longer be able to live in the property, which is standard for all income boosters with Gen H, but they’d be able to retain their equity in the home (this would be specific to your circumstances) and when you sell, they’d get paid out.
Again, everyone would need to pass our affordability checks for the Gen H mortgage, and then, if the ex-turned-income-booster wanted to buy another property, they’d need to pass their lender’s affordability checks too.
These options may not be right for your circumstances, though, so make sure you work with a broker to decide.
Obviously, the best possible scenario here is that no one ever falls out of love and divorces become a thing of the past. (Also that house prices come down and homeownership becomes accessible to everyone. Dream big, people! Someone has to!)
But the next best things are flexible tools that help people protect their financial interests and peace of mind to get through difficult situations safely and responsibly. Now more than ever, lenders like us are here to help.
You can learn more about our income booster and the different ways we can support aspiring buyers, home movers or remortgagers. Work with a broker to understand your options.
This post is informational only and should not be taken as advice. Talk to your broker to decide if a Gen H mortgage or an income booster could be right for you. All Gen H customers and income boosters are subject to full affordability and eligibility assessments, and the options shown in this post don’t constitute the guarantee of a mortgage offer.
