Mortgages for single parents - what you need to know
8th October 2019
Mortgages might seem more complicated if you’re a single parent. But they don’t have to be.
Whether you’ve just become a single parent - having been in a relationship - and want to know what’ll happen to your joint mortgage, or you’re a single parent hoping to get a mortgage, we explore your options.
What happens to your joint mortgage if you’re a new single parent
If you've separated from your partner and have a joint mortgage, there are a number of things you could do.
Buy out your ex
You could take on the mortgage yourself. You’d need your ex’s permission to be removed from the mortgage agreement.
As with all mortgages, you’d have to show a lender that you could afford the repayments both now and if interest rates rise.
Sell your home
You could sell your home and use the money to pay off the mortgage. You’d need written approval from your ex before putting your home on the market.
Transfer part of your home’s value to your ex
Otherwise, you could transfer a part of your home’s value to your ex and keep the rest. Your ex would receive a proportional percentage of your home’s value if you decide to sell up later.
The benefit of this option is that is you get to keep your home, which could be a good idea if you’d struggle to get a mortgage on your own. Your mortgage payments wouldn’t be affected and you’d still have a joint mortgage.
You’re both liable for your joint mortgage
Bear in mind that with a joint mortgage you and your ex are both liable for the repayments until you reach a formal solution, either in terms of your home or your personal circumstances.
If either one of you misses a payment it will negatively affect both your credit ratings. You’re financially linked while both of your names are on the deeds.
Getting help with your repayments
If you receive certain benefits, you could get help from the government to pay your mortgage.
To qualify you usually need to be receiving one of the following:
(income-based) Jobseeker’s Allowance
(income-related) Employment and Support Allowance
This help from the government is called Support for Mortgage Interest. It’s paid as a loan, and as the name suggests it can be used to pay off the interest charged on the money you’ve borrowed.
You’d have to repay it when you sell your home.
How to get a mortgage when you’re a single parent
When lenders consider you for a mortgage, they don’t just look at your income from your job. They’ll look at other payments you may receive too.
They’ll take into account certain state benefits as well as maintenance payments from an ex-partner. This will help boost the amount you could be able to borrow.
A lender will also review your finances and look at things like:
how much you spend each month
what you spend your money on
how much you have left to play with
how much you save
So make sure you’re managing your finances as lenders will look more favourably on you.
Bear in mind that even if you’ve had a mortgage before, such as a joint mortgage with your ex, you could still get a first-time buyer mortgage, which widens your options.
This is because lenders have different definitions of what a first-time buyer is. Some lenders will only consider you as a first-time buyer if you’ve never had a mortgage, while others are more flexible.
Nationwide, for example, define first-time buyers as people who haven’t had a mortgage in the last three years. (1)
A government scheme could help you buy a home
There are lots of government schemes to make it easier for people to buy a home, which could be a good option if you’re a single parent.
With Shared Ownership you buy a portion of a property, typically between 25% and 75%, and the rest is owned by the landlord, the council or a housing association.
You then pay rent on the portion of the property you don’t own. You can gradually increase your stake in the property over time.
You could be eligible for this scheme if:
you're a first-time buyer
you used to own a home but can’t afford to buy one now
you own a Shared Ownership home but want to move
Help to Buy Equity Loan
This scheme is for first-time buyers and existing homeowners who want to buy a new- build house.
You buy a property with just a 5% deposit and the government offers an equity loan worth up to 20% of the home (or up to 40% if you live in London).
You then take out a mortgage for the remaining percentage of the property’s value. You don’t pay any fees on the equity loan for the first five years.
Bear in mind that this scheme’s due to end in 2023.
Help to Buy ISA
The Help to Buy ISA not only helps you save for your first home, but gives you some money towards it.
The government boosts your savings by 25% when you use the cash as a deposit, up to a maximum of £3,000.
Act fast if you want one as the scheme ends on 30 November 2019.
Plenty of options for single parents
“While many people borrow as part of a couple, or with a friend, there are still plenty of options if you’re a single parent and want to take out a mortgage alone. You’ll just need to meet the lender’s affordability checks and requirements,” said Prakash Patel, a Mortgage Adviser at Trussle.