Using child maintenance in a mortgage application
Using your child maintenance in a mortgage application can make things more complicated. But it is possible. Here we look at which lenders accept child maintenance and tips for making a mortgage application with child maintenance.
Applying for a mortgage using child maintenance as income can make it more complicated. There are factors that will come into play with lenders, such as how long you’ll receive child maintenance payments for and whether you have a formal agreement in place.
But lenders are becoming increasingly flexible when it comes to child maintenance and mortgage applications. So whether you’ve retained the family home or you’re looking to buy a new property and you receive child maintenance payments, here’s what you need to know about mortgages.
Child maintenance mortgage applications. Where do I start?
The first thing to know is that different lenders have different lending criteria when it comes to using child maintenance in a mortgage application.
Some lenders will take into account 100% of child maintenance. However, some lenders will treat the income as secondary income which means that they would only take 50-60% of the maintenance payments into account when deciding how much they could lend. While other lenders won’t take it into consideration at all. And there are other factors that will come into it too. These include how long you will be receiving the payments for and in some cases whether you have a formal agreement in place or not.
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Which mortgage lenders accept child maintenance?
Each lender has different lending criteria. And if you want to include child maintenance in your mortgage application as income, most of them require you have a formal agreement in place about payments. For example:
- HSBC will take into account 100% of child maintenance as long as there is a court order in place, or a Child Support Agency assessment, and must be evidenced over the term of the mortgage.
- Barclays will take into account 100% of child maintenance. You’ll need a court order, CSA or CMS arrangement or evidence of the latest three months of payments; subject to sustainability over the term of the mortgage.
- Nationwide will take into account 100% of child maintenance. But it will need three months of bank statements as evidence. It will take a private arrangement, court order or CMS arrangement.
Generally speaking, if your child maintenance payments have been awarded by court order or the Child Maintenance Service, this will typically improve the choice of lender that will take the income into account.
There can be problems for those who have had child maintenance agreed in an informal agreement between the two parties. But it doesn’t mean your maintenance income won’t be taken into account. More lenders are now able to look at a track record of payments being made as adequate evidence.
‘It is an area where lenders are more flexible than many people expect them to be,’ explains David Hollingworth of L&C Mortgages. ‘Lenders recognise that not everyone will have a court order for maintenance payments but can show the payments have been made through bank statements.’
Find out how much you can afford to borrow on a mortgage without over stretching yourself with our How Much Can I Afford? guide
What other factors come into play with a child maintenance mortgage application?
When a lender is considering your application they will need to assess your ability to afford your repayments for the duration of the mortgage. If you’re using child maintenance as income in your mortgage application the lender will typically look at how long you will be receiving it for. This means the age of your child or children may be taken into account. And the lender will also take into account your earned income too. Lenders will want to see that the situation is sustainable, so that the mortgage will remain affordable when those maintenance payments cease.
Which mortgage lenders accept tax credits and child benefit?
Again, this will vary by lender. Some lenders will take these benefits into account but there will be questions. For example, a lender may not accept these if your child is above a certain age. While others may not accept child benefit as income if one applicant earns £50,000 or over – the point at which you need to start paying the High Income Child Benefit Charge.
Can I use the Help to Buy Equity Loan Scheme to buy a home?
If you’re using child maintenance as income in a mortgage application, there’s no reason why you can’t consider buying a home through the Help to Buy Equity Loan scheme. This is providing you meet the criteria, such as being a first time buyer. When it comes to getting a mortgage, you’ll still face a varying picture from lenders in terms of how they will take your maintenance income into account. This is where expert advice from a broker can be extremely useful.
How can a mortgage broker help?
When it comes to finding the best mortgage deal it’s always a good idea to speak to a mortgage broker. They can search the market for you and may have access to deals you won’t find on the High Street. But if you’re planning to use child maintenance as income when applying for your mortgage, a broker’s advice is invaluable.
They will break down how your income is made up into what you earn and any child maintenance payments. And within that, they’ll ask if there is a formal court order in place and how long will the child maintenance be paid for.
Lenders can vary quite substantially on this area. So once your broker has this breakdown, they’ll use their detailed knowledge of the market to find the most appropriate lender for you. Plus they will save you time and stress too.