Breaking up from a long-term relationship is traumatic enough without the additional worry of moving home. Can you afford to buy after your split, or will you rent? We look at the options and talk to those who have been through a break-up and the financial upheaval of finding a new home.
Following her divorce, Caroline White, 54 (pictured above with her son), was faced with the prospect of leaving the family home in Billingshurst, West Sussex.
“I thought myself and my son Ben, who’s 18, were going to be homeless,” she says. “We had to move, but I didn’t know what we would do.” Caroline, who had been married for 18 years, had lived in a five-bedroom property with her husband for the previous 12 years.
Eventually, after years of difficult divorce negotiations, the house was sold in January 2017, but unfortunately Caroline was not in the financial position to get back on to the property ladder without support.
“I was looking at disgusting rentals that would cost about £1,000 a month,” she says. “We have pets, and couldn’t find anything suitable, or that we wanted to live in,” explains Caroline, a retirement property manager.
However, she then came across the government’s Help to Buy: Shared Ownership initiative – a scheme that enables buyers to part own, part rent if they cannot afford to wholly buy properties themselves. Although shared ownership is usually associated with younger, struggling, first-time buyers, there is nothing to stop older buyers who have fallen off the ladder from applying.
Using £100,000 from her divorce settlement, along with money she inherited from her father, Caroline bought outright a 50% share in a three-bedroom house for £162,500 in the village of Rudgwick, West Sussex.
Caroline now pays £428 a month for the 50% share which is owned by Clarion Housing Group, plus a further £200 per month in charges. “This is the beginning of the rest of my life,” says Caroline. “My aim is to do what’s known as ‘staircase’ to full ownership of the property when I receive my pension,” she adds.
She admits to knowing very little about shared ownership before coming across information online, but would now recommend it to others who find themselves in a similar situation.
“I know there are thousands of other women in the same boat as me and I’d urge them to consider it,” she says.
Buying after a break-up
Getting back on the property ladder after a breakup can be the first stage in the healing process and can mark a fresh start. But there are lots of stories similar to Caroline’s, when doing so may be an uphill struggle, particularly later in life or if there are financial constraints.
Alistair McQueen, head of savings and retirement at financial provider Aviva, says: “Divorce is on the rise, both in age and numbers.”
According to latest figures from the Office for National Statistics, the number of divorces increased by 6,000 to 107,000 in 2016, with the biggest rise among those aged 55 and over.
“A relationship separation of any kind is inevitably different for both parties, as money and property goes from being a joint venture to a single enterprise – it’s a good time for a fresh start, but it can be very difficult,” adds Mr McQueen.
It can be scary if you need to apply for a mortgage on your own, particularly for the first time. “If you’re over 55, I wouldn’t suggest taking out a big mortgage unless you’re confident you can earn the money and repay it by retirement age,” says David Hollingworth, associate director of communications at mortgage broker London & Country.
If you aren’t able to repay the mortgage before you retire, getting a loan can become much more difficult.
“Lenders may consider lending beyond retirement age, but will need to be able to see that there will be adequate income in retirement to support the mortgage,” he adds.
Many lenders will impose a maximum age at the end of the mortgage term. “That will typically mean the mortgage must be repaid by 70 or 75. However, some lenders are more flexible than others and may consider lending longer,” says Mr Hollingworth.
For example, Halifax has increased the age to a maximum of 80 and Nationwide may go to 85, but only for those already retired.
“Some specialist lenders, such as Hodge Lifetime, have developed specific options for over-55s and can consider lending to as old as 95, where appropriate,” he adds.
Divorced borrowers may also encounter problems if their income includes maintenance payments from their former spouse or partner.
“Lenders take varied approaches to using maintenance payments in their affordability calculation,” Mr Hollingworth explains.
Some lenders, such as Coventry Building Society, will not include maintenance payments at all, while others, such as Barclays, take a proportion of the payments into account. However, the lender will also need to be able to see some proof of the payments and may need that to be by court order.
For example, Nationwide wants to see a copy of a formal maintenance agreement, court order or written private agreement, along with evidence of three months’ worth of payments. Many lenders will also look at the longevity of the payments, given that maintenance is often for the support of children. For these reasons, it makes sense to speak to a mortgage adviser, who will know which lenders are most likely to accept your application.
Renting after a split
If you’re unable to buy, or simply don’t want to step on to the property ladder after a split, renting will always be an option. However, if this is likely to be your long-term plan, Scottish Widows warns that you must be prepared for rising costs and the pressure this will put on your pension.
The pensions provider says that renters in their 50s are not saving nearly enough to cover the cost of renting in retirement. It found that one in eight retirees will be living in rental properties in 15 years’ time, and 42% of the average retirement income will be spent on rent.
It claims the average renter planning to retire in 15 years’ time needs to save an additional £525 every month into their pension – £6,300 a year – on top of current pension contributions, or work for an additional 5.1 years to cover growing rental costs in retirement.
‘I worry what will happen if work dries up’
Janet Donnelly, 53, from near Elgin, Moray, is a self-employed humanist celebrant. She split up from her partner after they had lived together for 17 years.
“The difficulty was that the house I shared with my partner belonged to him,” she says. “It was inherited from his parents and, because we weren’t married, I had no part in this. I had no financial security in the relationship.”
It took Janet several years to build up her business. “I had no savings and didn’t think I’d need them, so he gave me a substantial contribution towards a deposit when we split up, without which I wouldn’t have been able to move out,” she says.
She approached Halifax for a mortgage. “But this was incredibly traumatic, as at the same time I was dealing with emotional stress and being on my own. I had to produce accounts and was initially told I couldn’t get a mortgage.”
After a few hurdles, Janet finally got a mortgage from Halifax and moved into a one-bedroom house two and a half years ago. “Being 50, you can’t get a 25-year mortgage – my term is 17 years, and this bumps the payments up. I constantly worry what will happen if work dries up.”
Her advice for anyone in a relationship is to ensure you have “some financial independence”.
“I could potentially have made a financial claim on the house, but I didn’t want to go there – it was stressful enough.”
Tips on buying a home after a break-up
The end of a relationship is difficult enough without having to buy another home on your own. Here are some points to consider during the process.
Check your previous mortgage
Problems can arise if one person plans to live in the marital home after divorce. If your name is still on the mortgage paperwork, even though you no longer live at the property, then your mortgage debt will show up on your credit report.
If you need a mortgage, bear in mind that you’ll ideally have been employed for several years with a stable salary. If you’re self-employed, you’ll need around three years’ worth of income tax returns to prove a regular income to mortgage lenders. Showing lenders that you have a stable financial history and income will help you qualify for a competitive mortgage under affordability tests.
Calculate additional costs
As well as the upfront costs of buying a property, you’ll need to factor in other expenses, including stamp duty, survey and solicitor’s fees, alongside paying for removals, and any new furniture. These can swiftly add up, so do your sums carefully.
As a couple, you may have been able to afford your dream home, or at least one bigger than you could have done as a single person. You may need to lower your expectations when buying after a split. Be prepared to be flexible and bear in mind that you may be happy to have a smaller property that’s easier to manage.
Think about the location
Staying in the area you know can be comforting, especially if your children are with you. They’ve gone through enough changes without having to move schools or make new friends. You may fi nd you want to move away, however, to make a fresh start. If you are considering buying in a new area, try renting there first to make sure you like it.
Plan for bills
Being single will mean that household bills may increase as you will no longer split them with a partner. Check that you can afford the household bills before buying a new property. Remember, you can get a council tax discount as a single householder – contact the local authority for more information.