Mortgage blog: Divorcing couples trapped by tight grip on lending

Divorce is a stressful time. Having to come to terms with the end of a marriage and the potential impact on children and your family, financial matters can often be overlooked. However, with the number of divorces on the rise, couples are increasingly finding themselves financially trapped. Stagnant house prices and the lack of mortgage finance are making it tough for people to rebuild their lives. So, if you're separating from a partner, it's vital that you get the right financial advice. Our guide will help.

Divorcing couples finding it harder to split finances

The Daily Mail reports that "there were almost 120,000 divorces in England and Wales in 2010 - the latest year for which figures are available - 5% up on 2009". In the past, couples have traditionally used the proceeds from selling their home to equitably split their finances. However, falls in house prices over recent years have left many couples with little or no equity, making it hard to sell the family home and leaving newly separated individuals with precious little cash in the bank.

Fiona Sharp, a chartered financial planner and specialist in divorce issues, says: "Splitting one household into two is becoming increasingly difficult. The capacity of newly divorced couples to get a new mortgage has gone down because there is less equity in properties and tougher lending conditions."

Tough for separated individuals to get a new home loan

If you're going through a divorce or separation, getting back on your feet and finding a new home can be tough. Mortgage lenders typically want a large deposit from you which can be hard to find if you've split your finances with your former partner. If you have children, the situation could be even more difficult. Most mortgage lenders treat child maintenance payments as a ‘commitment', meaning that they will deduct these payments from your income before determining how much they will lend.

And, if you're in receipt of maintenance payments, many lenders require to see a court order and a history of these payments before they will treat them as income. NatWest, for example, wants to see six months of payments before it will include maintenance as income.

Keith Osborne, editor of whathouse.co.uk, says: "Many couples who are divorcing or separating are finding that they simply don't have sufficient capital for their deposit or income to support a mortgage in their own right. Until such a time as mortgage lenders relax their criteria or individuals can get back on their feet, more and more people coming out of a break-up are going to be forced into property to rent."

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