Currently, you’ll need a deposit of at least 5% of a property’s value to get a mortgage and a lender would then lend you 95% of the property’s value. So, if you wanted to buy a property valued at £140,000, you would need to save up at least £7,000 and borrow £133,000.

If you can manage to save 10% deposit, the interest rates are usually better and you have a greater choice of lenders. If you have some minor blemishes on your credit file, you are also more likely to be accepted with a larger deposit. Also, the less you borrow, the lower the monthly payments will be, so when the lender calculates affordability, you are more likely to pass.

The amount you can borrow depends on many factors. Most lenders look at basic salary plus overtime or bonus, but some accept tax credits and benefits as income.

The multiples are normally between 3.5 and 5 times income, and the greater the deposit or equity, the higher the multiple.

Credit liabilities are annualised and deducted prior to the multiple calculations. For example, if you have an income of £25,000 and are paying £250 per month (£3,000 per year) for a loan, your available income would then be £22,000 x 3.5 to 5.

A low credit score can reduce the amount you can borrow to keep payments affordable and help reduce the risk to the lender.

There are many factors that would be taken into consideration. Generally, the main factors would be the severity of the poor credit and how long ago this was. Some lenders are more sympathetic to past problems than others, for example small defaults over 3 years ago could be ignored if your finances have been conducted well since.

Your credit file contains your history for the previous 6 years, so if you had problems more historic than this, they shouldn’t be on it.

Someone who has been bankrupt can still get a mortgage. Bankruptcy will stay on your credit report for six years from the original date of the order, as long as it has been discharged by then. Bankruptcies that last longer than six years will remain until they are discharged.

After discharge, it’s sensible to check your credit report to make sure any debts that were included in the bankruptcy have also been updated. Once the bankruptcy drops off your report, it will no longer be visible to lenders carrying out a credit check. But bear in mind that some lenders ask you on the application form if you’ve been bankrupt in the past, so it might still come into play for some lenders’ decisions.

Tracker rate mortgages 

These deals work in a similar way to variable rate mortgages. The difference is that the mortgage tracks the Bank of England (BOE) base rate rather than the lender's Standard Variable Rate (SVR).

The advantage is that you are guaranteed to benefit from the full effect of Bank of England interest rate cuts. Lenders frequently reduce their SVR by less than the BOE rate cuts, for example 0.2% when the Central Bank has cut by 0.25%. If the rates rise, these would normally be matched in full by the lenders.

Tracker rates are a good idea if you feel that rates are going to drop or stay low.

With this in mind, now may be the best time to have a ………

*correct as at 2nd June, 2023

Fixed-rate mortgage

If you are someone who likes the security of knowing your repayments won't change, then a fixed-rated deal is probably for you. 

Two-year fixed rates are currently the most popular with British homeowners, but increasing numbers of borrowers are turning to longer term fixed rates. These longer term deals give more security and cut down remortgaging costs, but the Early Repayment Charges will be much higher in the early years, so if your circumstances were to change, it will cost you more to extract yourself from the deal.

Fixed rate mortgages are a great option just now as there is very little difference between interest rates on Trackers and Fixed rates currently. As the rates under a Tracker mortgage are likely to increase in the coming years, the rates and costs could potentially end up higher in the longer term.

Typically, there usually three options for couples with a mortgage:

Sell up and move out

If both you and your partner want to move out of the property, then often the easiest way is to sell the house and pay off the mortgage. This can provide a clean break and be the least messy way of moving on after a separation. In these circumstances, any equity left after the mortgage has been paid off will be considered a marital asset and split between the two of you. Who gets what from the residual funds can be open to dispute, so often the quickest and easiest way is to have this agreed prior to the sale. Should the sale price differ from expectation, then a slight adjustment should be achievable to reach an amicable settlement.

If you cannot reach an agreement, then the matter would need to be settled in the divorce court. This can be a more expensive and drawn out process, but if you can’t reach a satisfactory amicable agreement, you should always seek legal advice.

If you want to keep the property

If you or your partner intend to continue living in the property, then you will need to find a solution that transfers ownership to whoever wants to keep it. Transferring the mortgage into one name will involve one partner buying the other's share in the property, including their share of any equity involved.

You will need to prove to the lender that the remaining partner will be able to afford the mortgage on their own - remember the existing lender is under no obligation to remove either of you or to transfer the mortgage to one name.

If you can satisfy your lender that the remaining partner can afford the mortgage, then they may agree to them becoming the sole mortgage holder.

Sometimes, you need to remortgage to find a lender that will accept you under their own and different lending criteria. We would submit a mortgage application in the normal manner, providing income and liabilities to the new lender so they can assess affordability. If you need to borrow money to fund purchasing your partner's share, you will need to prove that you can afford the total borrowing.

Moving your joint mortgage into just one name can provide the same financial break as selling up, while keeping ownership of your existing home.

Often, if children are involved, the two parties can reach an amicable agreement to ensure the children have a safe and familiar environment to continue living in. If children are older, often protecting their inheritance can be a consideration.

Continue to pay your existing mortgage

In some circumstances, you may decide to continue paying the existing mortgage, especially if you do not have long left and the divorce is on good terms. If you are considering this, the partner who moves out will need to consider if they can afford to contribute towards the mortgage and their own separate additional living costs.

This solution can be useful if your mortgage has high early repayment charges as it avoids handing over large amounts of money to the lender unnecessarily.

There are pros and cons in this process, so both are outlined below:

The Pros

By adding the unsecured debt to the mortgage and paying over a much longer period, the monthly payments will be reduced. This will allow you to function much easier and provide additional disposable income to spend on household essentials. If you were feeling under financial pressure to keep up with payments and on the verge of being unable to do so, this could provide a solution. 

If you were only paying the minimum monthly payment on credit cards, it could potentially take over 40 years to repay the outstanding balance. By remortgaging, you will repay over a shorter term and you will be able to see the balance reducing over time.

The Cons

By adding your unsecured credit card debts to your mortgage, you are changing them to a secured lending basis and your home may be at risk if you fail to keep up the repayments.

Although the monthly payments are reduced, the overall amount you will pay in mortgage interest will be increased due to the longer term.

Some options

• You could move your credit cards to 0% for balance transfers;
• Get an unsecured loan to repay credit cards;
• Overpay credit cards to see balance reduce quicker;
• Cut back on other expenditure to provide disposable income;
• If you remortgage, try to overpay it to reduce total term;
• If you remortgage to add debt, only do it once;
• You could get a secured loan and keep mortgage as is.

Whatever option you choose, keep up the monthly payments.

Think carefully before securing other debts against your home. Consolidating debt may reduce your outgoings now, but you may end up paying more overall. Your home may be repossessed if you do not keep up

repayments on your mortgage.