Divorce and Mortgages
Divorce and mortgages make a sticky situation, and, unfortunately, close to 40% of all marriages will eventually end in divorce. For this reason, married people need to know how to handle their mortgages if they should some day face a divorce. Also, those that already know they are headed for divorce should know what they need to do to protect themselves.
Problems with Divorce and Mortgages
Why is divorce so dangerous when you hold a mortgage on your property? Unfortunately, divorces cause serious financial problems for many couples. Since the mortgage is usually in the name of both spouses, a divorce complicates matters significantly. If not handled carefully, a divorce can cause those with excellent credit ratings to suddenly end up with credit problems, simply because they got stuck with the majority of the responsibility of the mortgage after the divorce.
Mortgage Options for Newly Divorced People
If you are the one who is keeping the house, you may find yourself suddenly unable to afford your monthly payments. Mortgage lenders in the UK are realizing that borrowers in these situations simply need some extra time to get back on their feet. As a result, mortgages for divorced people are becoming more and more common.
These mortgages carry special terms that make it possible for the divorced individual to have some time to figure out his or her finances. For instance, they may offer a low, fixed interest rate for a long period, as long as five years. These mortgage products may even offer several months of 0% interest.
If you are paying alimony, a lender offering you a divorced mortgage will consider these payments when deciding how much you can afford to borrow. This will save you from borrowing more than you can realistically repay.
If you are newly divorced, you may be able to find a mortgage that allows you to finance up to 100% of your property’s value. After all, you likely did not know that the divorce was coming soon enough to start saving for a down payment on your home. You may also be able to choose between repayment or interest only mortgage products.
Finding Mortgages for Divorced People
Mortgages for divorced people are not easy to find. However, they are available. If you are in the market for this type of mortgage, you will have to shop around carefully to find a lender willing to work with you and your current financial situation. You may wish to use the help of a mortgage broker to help you determine what mortgage you can apply for and realistically receive.