People who are divorced, or those whose relationship has broken down, are being penalised because many mortgage lenders don’t accept child support as income, meaning that they could be forced to keep their ex’s name on the mortgage, or be denied a mortgage altogether.
Two lenders, don’t accept child support payments as part of a borrower’s income at all.
Two others don’t generally accept child support as income, but say they will look at applications on a case-by-case basis.
A further two lenders, only accept a percentage of child support income - in one case only 50 per cent.
Six lenders insist on a court order or Child Support Agency (CSA)/Child Maintenance Service (CMS) payment order or similar.
Only five lenders accept child support as income without a court order or official CSA/CMS payment plan in place.
Mortgage lenders that ignore child support or restrict how much is taken into account may say it’s because these payments aren’t guaranteed and they need to check the support is due to be paid for several years, but few jobs come with a guarantee these days.
Mortgage lenders must make sure mortgages are affordable, which is right, but should also understand that the income of divorced women , and men – may include child support.
The family law organisation Resolution agrees and spokesman Nigel Shepherd said: “Privately agreed child support payments should be accepted as relevant income.”
It is sensible for a lender to require to see the private agreement between the parties setting out the terms of the maintenance payments, plus a track record of regular payments, which can be proved by the applicant providing bank statements for, say, six months, to satisfy themselves the arrangement are robust although maintenance payments are only likely to be reduced or temporarily cease if the payer loses their job, i.e. exactly the same risk of any mortgages generally, which are based on earned income.
Rather than restricting acceptance of maintenance payments to only 50 per cent or 60 per cent, as some lenders do when calculating affordability, once the principle is established there is a strong argument for not only accepting 100 per cent, but going further and grossing up the payments in view of the fact that maintenance payments are tax free.
As government policy is to encourage the parties to come to a private arrangement for maintenance payments, a policy being reinforced by the CMS under plans to impose charges on both parties when its services are used, it is seemingly illogical for lenders to discriminate against applicants who are able to agree terms for maintenance without involving the court or the CMS.
