Buying a Property

Buying a property after a divorce can be both a challenging and empowering experience. It often represents a fresh start and a chance to establish a new home, but it also comes with practical and emotional considerations. Financially, it’s crucial to reassess your budget, credit score, and long-term goals, as your financial situation may have changed significantly post-divorce.

Emotionally, purchasing a new home can symbolise moving forward, providing a stable and personal space where you can rebuild your life and create new memories. Seeking advice from financial advisors and real estate professionals can help ensure the process is smooth and aligned with your new circumstances.

Considerations when Buying a Property:

Determine Affordability

Speak to a mortgage broker or try an online mortgage calculator to work out how much you can afford.

1. Calculate Your Monthly Income

Gross Income: Start with your total gross income, which includes your salary and any other regular income sources, such as bonuses, rental income, or investments.
Net Income: Subtract taxes, pension contributions, and any other deductions to determine your net (take-home) income.

2. Assess Your Monthly Expenses

List all your regular expenses, including:
- Rent (if applicable) or existing mortgage payments
- Utility bills (electricity, gas, water, internet)
- Groceries
- Transportation (car payments, insurance, fuel, public transport)
- Insurance (health, life, etc.)
- Childcare or school fees
- Loan repayments (credit cards, personal loans)
- Entertainment and dining out
- Savings and investments
- Any other recurring expenses

3. Determine Your Disposable Income

Subtract your total monthly expenses from your net income to find out how much disposable income you have each month. This figure represents the maximum amount you could theoretically afford to pay towards a mortgage.

4. Use the 28/36 Rule

28% Rule: Lenders often recommend that your monthly mortgage payment (including property taxes, homeowners insurance, and mortgage insurance, if applicable) should not exceed 28% of your gross monthly income.
36% Rule: Your total debt payments (including mortgage, credit cards, car loans, and other debts) should not exceed 36% of your gross monthly income.
Calculation Example: If your gross monthly income is $5,000, the maximum mortgage payment should be $1,400 (28% of $5,000). If you have other debts, the total debt payments should not exceed $1,800 (36% of $5,000).

5. Consider Your Deposit

The size of your deposit will impact the mortgage amount you can afford. A larger deposit reduces the loan-to-value (LTV) ratio, which can lower your monthly payments and increase the amount you can borrow.
Example: If you have a $40,000 deposit and want to buy a $200,000 home, you’ll need a $160,000 mortgage, which is an 80% LTV.

6. Factor in Interest Rates

Mortgage rates significantly impact your monthly payments. Use online mortgage calculators to input different interest rates and loan amounts to see how changes in rates affect affordability.
Tip: Opt for a fixed-rate mortgage if you prefer predictable payments, or a variable-rate mortgage if you are comfortable with fluctuations in your payments.

7. Include Additional Costs

Don’t forget to budget for other home-buying expenses, such as:
- Stamp duty or property taxes
- Legal fees
- Home insurance
- Moving costs
- Maintenance and repairs
Ensure these costs are factored into your overall budget to avoid financial strain.

8. Stress-Test Your Finances

Consider whether you could still afford your mortgage if interest rates rose or if your income decreased. Most lenders will stress-test your mortgage application by simulating higher interest rates to ensure you can still manage the payments.

9. Get Pre-Approved

Once you have a clear idea of what you can afford, seek mortgage pre-approval from a lender. Pre-approval gives you a more accurate picture of what you can borrow and makes you a more credible buyer when making offers on properties.

By carefully considering these factors, you can work out how much you can afford to spend on a mortgage and ensure that your home purchase is within your financial means.

Assess Your Needs

Are you looking for a property that is ready to move into, or are you open to doing some work on something that has potential?

Is the property in a good catchment area for schools if you have residency for the children, or close by for you to maintain good contact?

What is the neighbourhood like? Are the properties well-kept and are the neighbours nice?

What local amenities are nearby – shops, gym, healthcare?

Do your research on the local area. Websites such as Check My Street can tell you a lot about the neighbourhood.

Making an Offer

When you find the property you are interested in make an offer. A first offer would usually be below the asking price to allow room for negotiation. However this will depend upon the demand for properties in the area and any interest in the property shown so far. If you are going through an estate agent ask their advice on a reasonable offer.

When your offer has been accepted you will need to do the following:

* Contact your mortgage lender and formally apply for a mortgage
* Find a solicitor who specialises in conveyancing. They will take care of the legal requirements such as a Land Registry search to ensure the vendor has the right to sell the property and the transfer of the property to your name
* Appoint a surveyor. Your mortgage lender may arrange a basic survey but it is wise to appoint your own surveyor to do a full structural survey, especially if the house is an older property. This will uncover problems such as damp or structural problems
* Negotiate fixtures and fittings with the seller
* Get quotes for life, contents and buildings insurance
* Agree a date on which contracts will be exchanged and you can take possession of the property
* Begin packing and arrange friends and a removal firm to help with your move

Moving in

Make a list of essentials you need to purchase for your new home.
Take initial meter readings and inform the utility companies if you are responsible for the bills.
Obtain a TV license if required (or ensure your streaming services are compliant).
Set up contents insurance to protect your belongings.
Update your address with your bank, credit card companies, and other relevant institutions.
Register to vote and notify the local council tax office of your move.

Buying Your Ex Out

If you jointly own a property and are looking to buy your ex partner’s share how you go about this will depend upon your circumstances. If you are going through the process of a divorce your assets will be dealt with as part of your Ancillary Relief. If you were co-habiting the law will not treat you as if you were married but simply as joint owners of a property.

If you want to buy your ex out:

* Have your property valued by an estate agent. Work out how much equity is in the property so that you can work out a fair price for your partner’s share. This will probably be half the equity minus any legal fees or other costs involved in the transfer
* Negotiate by offsetting the equity in the property against other assets or reduced maintenance payments. Try to keep things amicable so that you can reach a reasonable agreement. The better the terms you are on with your ex the more chance you have of getting what you want at the right price
* Once your partner has agreed appoint a solicitor to deal with the legal aspect of the transfer of the property to your name.
* Rather than simply arrange for the existing mortgage to be transfered to your name contact several mortgage providers and ask what they can offer you. Alternatively contact a mortgage broker who can search out the best deal for you and deal with any necessary paperwork on your behalf
* If you cannot reach an agreement with your partner consider mediation or seek advice from a solicitor.

NB: If you do decide to buy your ex out some time after your divorce settlement check with a family law solicitor to see if your divorce agreement needs amending, or your ex could have a claim on it.