Introduction
We recently helped our customer secure a remortgage in Fleet, Hampshire, following a divorce. They wanted to retain the existing property in their sole name, remove their former partner from the mortgage and title deeds, and arrange borrowing that remained affordable on their income alone.
The biggest hurdle was the complex income and demonstrating affordability using three separate income sources: employed earnings, partnership profits and sole trader income. The proposed mortgage term also meant our customer would be over 70 when the mortgage ended, restricting the lenders available.
After reviewing the income evidence, working with the customer’s accountant and discussing the application with a specialist lender, we secured an Agreement in Principle and full mortgage approval through Precise Mortgages.
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The Scenario
Our customer owned a residential property in Fleet and needed to remortgage as part of an ongoing divorce settlement.
The intention was to replace the existing mortgage with borrowing in their sole name and complete a transfer of equity. This would allow their former partner to be removed from the mortgage and property ownership once the legal process was completed.
The required mortgage was approximately £80,000, representing a loan-to-value of around 14%. Despite the substantial equity available, the application still needed to meet the lender’s affordability and age requirements.
Our customer received income from three sources:
- Employed salary.
- A share of profits from a business partnership.
- Net profits from a separate sole trader business.
They had an established self-employed trading history, with tax calculations and tax year overviews available to support their earnings.
The customer also had existing unsecured borrowing, including credit cards and personal loans. These commitments needed to be cleared before or at completion to satisfy affordability requirements.
A 17-year capital repayment mortgage was required, with monthly payments that would remain manageable within the customer’s budget.
The Challenge
The main difficulty was finding a lender that could assess all three income sources together while also accommodating the customer’s age at the end of the mortgage term.
Assessing Multiple Income Sources
Although our customer had an established history of self-employment, their earnings did not come from a single salary or business.
The lender needed to consider employed income alongside profits received through both a partnership and a sole trader business.
Different lenders assess self-employed income differently, and the combination of these earnings created difficulties with some mainstream affordability assessments.
It was important to establish which figures could be supported by the available tax documentation and identify a lender prepared to assess the overall income position.
Mortgage Term Extending Beyond Age 70
The proposed 17-year mortgage term meant our customer would be over 70 when the mortgage was due to finish.
This created a further restriction because lenders apply different maximum-age and income assessment requirements.
We needed to find a lender that could consider the required mortgage term alongside the customer’s employment and self-employment circumstances.
Existing Financial Commitments
Our customer’s credit cards and personal loans also affected the amount they could borrow.
Clearing these commitments was necessary for the proposed borrowing to meet the lender’s affordability requirements.
The mortgage therefore needed to be considered alongside a clear plan for dealing with the existing unsecured debts.
Timing of the Divorce Proceedings
The application was further complicated by the timing of the divorce settlement and related property proceedings.
The customer could not proceed immediately, so the mortgage arrangements had to remain aligned with developments outside the lender’s control.
What We Did
Reviewed the Customer’s Income in Detail
We began by examining the customer’s financial information across all three income sources.
This included reviewing payslips, historical tax calculations, tax year overviews, business accounts and personal bank statements.
Rather than relying on the employed salary alone, we considered how the partnership and sole trader profits could contribute towards the lender’s affordability assessment.
This was particularly important because the customer needed sufficient recognised income to support the borrowing independently.
Worked with the Customer’s Accountant
We liaised closely with the customer’s accountant regarding their self-employed income and outstanding tax information.
This included ensuring the final tax returns and supporting figures accurately reflected the relevant income available for the mortgage assessment.
Having consistent, up-to-date financial evidence was important when presenting a case involving several different income sources.
Researched Specialist Mortgage Lenders
We investigated lenders that could consider the combination of employed income, partnership profits and sole trader earnings.
We also needed to establish which lenders could accommodate the customer’s age at the end of the proposed mortgage term.
Our research identified Precise Mortgages as a potential solution.
Before placing the application, we contacted the lender’s Business Development Manager and discussed the circumstances in advance.
This allowed us to explore the suitability of the lender’s criteria before proceeding with the full application.
Addressed the Affordability Requirements
Alongside the income assessment, we reviewed the customer’s existing unsecured borrowing.
We established that clearing the relevant credit cards and personal loans would be necessary to meet the mortgage affordability requirements.
This formed part of the overall application strategy, ensuring that the proposed borrowing and treatment of existing commitments were considered together.
Managed the Case Throughout the Legal Process
The case required ongoing involvement over several months because the customer’s ability to proceed depended on the timing of the divorce and related property matters.
We maintained the Decision in Principle arrangements as circumstances and timescales developed, ensuring the mortgage position remained under review.
When the customer became ready to proceed, we coordinated the application and resubmission requirements around the updated timeline.
This longer-term case management was important because obtaining an initial lending decision was only one part of the process.
The Solution
We recommended a fixed-rate residential remortgage with Precise Mortgages.
The mortgage was structured on a capital and interest repayment basis over 17 years, with borrowing of approximately £80,000.
Precise Mortgages was suitable because its criteria could accommodate the combination of employed and self-employed income while also considering the customer’s age at mortgage maturity.
The proposed mortgage was in our customer’s sole name, supporting the intended transfer of equity.
The repayment structure was selected with the customer’s budget and preference for manageable monthly payments in mind.
Why This Solution Worked
This application required finding a lender whose income assessment and age requirements could work together.
Precise Mortgages could consider the customer’s income from employment, partnership profits and sole trader earnings, rather than relying on one income source alone.
The lender could also accommodate the proposed mortgage term despite the customer being over 70 at maturity.
By establishing the lender’s position in advance, coordinating the income evidence with the accountant and addressing the outstanding financial commitments, we were able to present an application that met the relevant affordability requirements.
The Result
We successfully secured an Agreement in Principle followed by full mortgage approval from Precise Mortgages in our customer’s sole name.
This provided the approved mortgage arrangement needed to progress the transfer of equity and the proposed removal of their former partner from the mortgage.
The customer was happy with the service provided, particularly following the extended period of involvement required to bring the mortgage application forward.
We also established an ongoing relationship to assist with future mortgage rate reviews and protection requirements.
What This Case Shows
This shows that having substantial equity in a property does not automatically make a remortgage straightforward.
Even at a relatively low loan-to-value, lenders still need to assess whether the applicant can afford the borrowing and whether their circumstances meet the relevant criteria.
For customers with employed and self-employed earnings, the way a lender assesses different income sources can make a significant difference to the available options.
It also highlights the importance of considering age-at-maturity requirements and the timing of legal proceedings when arranging a remortgage following separation or divorce.
By reviewing these issues together, we were able to identify an appropriate lender and secure mortgage approval for our customer.
Need Help with a Remortgage Following Separation or Divorce?
If you are looking to take over a mortgage in your sole name, arrange a transfer of equity or need help with complex employed and self-employed income, Kerr & Watson can review your circumstances.
We provide independent, whole-of-market mortgage advice, including mortgage advice in Fleet and the surrounding Hampshire area.
Contact Kerr & Watson to discuss your mortgage options and how we may be able to help.
