Introduction
We recently helped our customer secure a mortgage to purchase a property in Farnborough, Hampshire, following a relationship separation.
The main challenge was establishing how much they could borrow on a single income while arranging for equity from their previous jointly owned property to be used towards the new purchase.
After assessing affordability across different lenders and supporting our customer through their property search, we arranged a five-year fixed-rate repayment mortgage with NatWest. The lender approved the borrowing required for the new property, allowing our customer to progress their purchase independently.
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The Scenario
Our customer was looking to purchase a new home following a separation.
Having previously been part of a joint household, they now needed to arrange a home mover mortgage in their sole name and establish what would be affordable based on their individual income and financial commitments.
They were employed on a fixed salary and had equity available from the sale of their previous jointly owned property.
The proposed purchase was in Farnborough, with a mortgage requirement of approximately £230,000 against a property valued at around £320,000.
This represented borrowing of approximately 63% of the property’s value, with the remaining purchase funds coming from existing equity.
Our customer wanted a capital repayment mortgage over 30 years, with a longer-term fixed interest rate to provide stability over their future mortgage payments.
They also preferred a mortgage with early repayment charges (ERCs) that reduced over the fixed-rate period, providing greater flexibility if their circumstances changed or they needed to repay the mortgage early.
They also needed an Agreement in Principle so they could confidently make offers on suitable properties.
The Challenge
The main challenge was establishing suitable mortgage borrowing on one income while coordinating the sale of the previous property with the new purchase.
Affordability Following a Separation
When moving from a joint mortgage arrangement to borrowing independently, affordability can change considerably.
Rather than relying on two incomes, our customer’s new mortgage needed to be assessed using their sole salary.
The lender also needed to consider their ongoing financial commitments and household expenditure.
Different lenders use different affordability calculations, so the amount available could vary depending on how each lender assessed their circumstances.
We needed to identify a lender able to provide the required borrowing without placing unnecessary pressure on our customer’s monthly budget.
Balancing Payment Stability with Flexibility
Our customer wanted the certainty of a five-year fixed interest rate but also preferred a mortgage with reducing early repayment charges.
Some fixed-rate products apply the same percentage charge throughout the initial period, while others reduce the charge over time.
We needed to consider these differences alongside affordability, ensuring the recommended mortgage provided suitable flexibility without compromising the customer’s borrowing requirements.
Using Equity from the Previous Property
Our customer’s deposit was coming from the sale of their previous jointly owned home.
Although they had substantial equity available, the funds depended on the existing property transaction progressing.
This created an additional consideration when planning the new purchase.
The lender needed suitable evidence of the deposit, while the conveyancing arrangements needed to account for the release of funds from the previous property.
Keeping the Property Search Moving
Our customer was actively searching for a suitable home and negotiating with estate agents.
They needed an Agreement in Principle that accurately reflected their borrowing position and could support their purchase offers.
As their property search progressed, the borrowing requirements and purchase figures also needed reviewing.
Maintaining communication and ensuring the mortgage arrangements kept pace with the search were important parts of the process.
What We Did
Reviewed Single-Income Mortgage Affordability
We began by reviewing our customer’s employed income, financial commitments and household expenditure.
We then assessed borrowing options across the mortgage market to establish which lenders could accommodate the required loan amount.
Our research focused on lenders whose affordability calculations were suitable for a single applicant with existing household commitments.
We also considered the substantial deposit available from the previous property and how this affected the mortgage options.
Identified a Suitable Lender
Our research identified NatWest as a suitable option based on the borrowing required and our customer’s financial circumstances.
We contacted the lender and a business development manager in advance to discuss the application.
Following our assessment, we arranged an Agreement in Principle with NatWest.
This gave our customer an indication of the borrowing available, subject to the lender’s full mortgage assessment, and provided supporting evidence for discussions with estate agents.
Reviewed the Deposit Arrangements
We reviewed the proposed source of deposit and the anticipated release of equity from the previous property.
The supporting information included a memorandum of sale, alongside the customer’s financial and identification documents.
We also liaised with the conveyancing solicitors regarding the sale and purchase arrangements.
This helped ensure the deposit requirements were considered alongside the mortgage application rather than being treated as a separate issue.
Supported the Property Search and Application
We continued assisting our customer throughout their property search.
This included reviewing purchase figures, supporting their discussions with estate agents and maintaining the Agreement in Principle arrangements.
Our team also provided continuity when individual advisers were unavailable, so the customer’s enquiries and mortgage requirements could continue to be addressed.
Once the purchase arrangements progressed, we supported the full mortgage application with NatWest using the relevant income, deposit and affordability information.
The Solution
We arranged a residential purchase mortgage with NatWest.
The mortgage included:
- Borrowing of approximately £230,000.
- Approximately 63% loan-to-value.
- A 30-year mortgage term.
- Capital and interest repayments.
- A five-year fixed-rate product.
- The mortgage arranged in our customer’s sole name.
- Early repayment charges that reduced over the five-year fixed-rate period.
- An allowance for overpayments of up to 20% without an early repayment charge, subject to the mortgage product’s terms.
The longer repayment term helped provide manageable monthly payments based on the customer’s individual income.
The five-year fixed-rate period also offered certainty over the mortgage interest rate during the initial years following the move.
Why This Solution Worked
The key factor was finding a lender whose affordability assessment could accommodate the mortgage required on one salary.
NatWest was able to consider our customer’s employed income and financial commitments alongside the substantial equity being contributed towards the purchase.
The lower loan-to-value also meant the borrowing represented a relatively modest proportion of the property’s value, although affordability still needed to be assessed independently.
By establishing the borrowing position early and arranging an Agreement in Principle, we could support the property search while the existing property sale arrangements were progressing.
The recommended mortgage provided the required borrowing and a repayment structure suited to the customer’s circumstances.
The reducing early repayment charges also aligned with our customer’s preference for flexibility. While the five-year fixed rate provided payment stability, the reducing charges meant that the potential cost of repaying the mortgage early would decrease as the fixed-rate period progressed.
This gave our customer a balance between predictable monthly repayments and the ability to adapt if their circumstances changed.
The Result
Our customer secured an Agreement in Principle followed by full mortgage approval from NatWest for their property purchase in Farnborough.
The approved mortgage provided the borrowing needed in their sole name, with a 30-year repayment term and a five-year fixed rate.
We also supported the customer with their property search, estate agent discussions and the arrangements surrounding their existing property equity.
The mortgage approval allowed them to move forward with purchasing a home independently.
We subsequently arranged a protection review to consider their insurance requirements as a single-income household.
What This Case Shows
Arranging a mortgage following a relationship separation can involve more than simply removing one person’s income from the affordability calculation.
The available borrowing may depend on household commitments, the equity available from an existing property and how different lenders assess individual affordability.
Where a new purchase also depends on the sale of a jointly owned property, considering the deposit arrangements early can help identify potential issues.
This case demonstrates the importance of establishing borrowing limits before making offers and keeping mortgage arrangements updated throughout the property search.
Need a Mortgage Following a Separation?
If you are moving home following a separation or need to arrange a mortgage in your sole name, Kerr & Watson can review your income, financial commitments and deposit to explain your borrowing options.
We provide independent, whole-of-market home mover mortgage advice, including mortgage advice in Farnborough and the surrounding areas.
Contact Kerr & Watson to discuss your mortgage requirements.
