The mortgage capacity assessment report or Mortgage capability report is a detailed investigation into the level of mortgage a person is likely to be successful in obtaining. It will compare the level of maximum borrowing with the amount of mortgage the individual can actually afford to maintain. The assessment is more reliable than a visit to your bank or by using one of the many online mortgage capacity calculators available.
The assessment is often required during divorce proceedings when proof of mortgage borrowing is required. Your mortgage capacity assessment needs to be credible, realistic, and accurate and will help you in a number of ways:
- It can be used by the Court to help the Judge make a decision on finances.
- It can be used by the other party (ex-partner and/or their solicitors).
- From the Legal Representatives perspective it can be considered “Best Practice” in the way mortgage capacity is demonstrated.
- Each mortgage capacity assessment is different to reflect the client’s/individuals specific circumstances.
- It helps you/your client make accurate financial plans for the future.
- Settles disputes between divorcing parties
Decisions regarding living arrangements and who can stay in the family home can be difficult to agree on and even more difficult to obtain details and unbiased information when it comes to valuations and looking at future mortgage affordability and borrowing capacity.
Future living arrangements is often a big part of the challenge in reaching a settlement which is fair in the circumstances. Deciding who should live where often depends on the size of the matrimonial pot and who can afford what.
The Courts at a first hearing will usually direct the divorcing couple to obtain sales particulars for properties that they believe suitable for themselves, as well as properties they believe suitable for their spouse. In addition, the Court will also require evidence of the mortgage capacity the respective parties may have. The parties are usually informed to serve evidence of mortgage raising capacity 8 weeks before the Financial Dispute Resolution Hearing (FDR) in the form of a brokers certificate setting out:
- the maximum mortgage available,
- the income and outgoings upon which the calculations are based,
- the monthly repayments upon the stated mortgage capacity.
There is permission for each party to file and serve mortgage raising capacity for the other within 14 days if they dispute that which has been provided.
Different lenders of course have different criteria and therefore having an independent mortgage capacity report can often paint a far more accurate and unbiased picture rather than relying on the word of one lender where all of the terms of borrowing are not clear and they can only provide lending information based on their own product.
Different lenders have different factors that are taken into consideration and therefore approaching one lender for a mortgage figure doesn’t provide a true reflection of the market based on your circumstances.
There are many reasons why solicitors advise clients to obtain a professional mortgage capacity assessment. These factors include:
- Where a client does not have the time to trawl the high street banks or complete lenders affordability assessments to find this information out for themselves.
- Where the individuals’ financial circumstances are either complex or unusual, for example, many sources of income, self-employed income, clients who have had recent changes in employment or perhaps historic bad credit;
- Where a client needs to consider different scenarios of Mortgage capacity, for example, potential financial settlement, varying amounts of maintenance, varying amounts of deposit for a property, which, in turn, could affect a loan to value calculation.
Whilst going direct to mortgage providers can provide that specific lender affordability details, a mortgage is not secure until such time as a full mortgage offer has been made. As an independent mortgage broker we will be able to give clients advice as to the likelihood of being able to obtain a full mortgage offer and advise which lenders are more suited to your individual needs.
A detailed mortgage capacity report provides our clients, the oppositions legal representatives and the Court, if need be, with detailed information about the maximum borrowing ability, the cost of the borrowing and the mortgage fees associated. Such reports can also assist in mediation.
Assessments are designed to provide divorcing couples with specific information regarding their likely borrowing potential, which can take into account a range of mortgage lenders, different mortgage products and widely varying lending criteria.
Mortgage Capacity Assessment Letter
A Mortgage Capacity Assessment Letter supports your Mortgage Capacity assessment report. The letter is more thorough than just the report or visiting your bank as we will check with a number of lenders and ensure the figures entered on the affordability calculators are correct and the justify our advice on our Mortgage Capacity Assessment letter.
As we are qualified and regulated Mortgage brokers, the letter we provide will be on our letter headed paper, accurate and should hold more weight than a print out from your bank.
The amount you can obtain from various lenders can alter significantly. an example being how one particular scenario can result in over £100,000 difference from the highest lending lender to the lowest.
Where your income is not from a main basic wage – but also things like maintenance, bonuses, benefits etc, the amount of those income sources lenders will use can vary – some will use 100%, others 50% and others will only use it if there is a year or 2 evidence of it being received. If you put these figures in incorrectly at the outset, it will mean you get incorrect Mortgage figures at the end.
We will go through a short questionnaire with you (it will take around 15-20 minutes) in order to get your circumstances down on paper.
The Assessment letter along with your report will be provided to you and only you – unless you ask us to send it elsewhere. You can then pass the letter on to the courts, or the other party if you wish.
The letter will be written for you and your circumstances and scenarios required
If your circumstances will change following the proceedings (ie an increase/decrease in hours worked, benefits received, childcare costs etc) then we can detail in your letter confirmation of how much you can obtain in various circumstances.
Commonly Asked Questions
What is a Mortgage Capacity Report?
A Mortgage Capacity Report is a document prepared by our qualified mortgage advisors to aid a person going through a divorce or separation.
It can also be referred to as a Mortgage Capacity letter, Mortgage Capacity assessment, Mortgage borrowing report or Mortgage borrowing capacity report, Mortgage capability report.
It explains to the person what they may be able to borrow depending on certain situations.
The document is then used to come up with a separation agreement regarding the couple’s finances.
Very often, a borrower may need to purchase the other owner’s share in the property. The amount of money that gets allocated to a person during a separation will depend on multiple factors.
A judge would hear information from both sides, taking into account children, people’s earning potential and more, to agree a financial settlement believed to be fair to both parties.
The Mortgage Capacity assessment Report will tell the judge what a person’s borrowing potential is, taking into account many things.
For instance, how much of a deposit they may have following the separation or divorce. Their income and outgoings are also taken into consideration to calculate the maximum loan that may be achievable.
The borrower’s retirement plans will be factored and this would affect the term of the mortgage.
Once everything has been taken into consideration, our mortgage advisors will carry out some research and then prepare a letter of advice explaining what your options would be in certain situations.
Many separation solicitors insist on this letter being drafted, and it is important that a qualified mortgage advisor prepares it.
This is because it is a confirmation of what you may be able to borrow on a residential mortgage basis.
Not all mortgage advisors will offer the service, as some just focus their time on arranging mortgages instead.
How much does a Mortgage Capacity Report cost?
The amount of money that a Mortgage Capacity Report costs will depend on the firm that is arranging it.
Some mortgage advice firms do not offer the service at all due to the time it takes to prepare a report.
However, for our Mortgage Capacity Report you will be in the region of £345.
Firms may charge more if there are multiple scenarios to take into account (for instance, mortgage capacity based on numerous alimony outgoing examples that are not agreed). As a firm we do not charge extra for this to be considered.
Mortgage advisors may also charge more when amendments to the report are needed. Again, as a firm, we do not charge additional for this requirement.
Firms should be able to tell you how their fee structure works and what the cost would be if amendments are needed prior to your decision in using them.
Some mortgage brokers may be willing to reduce your broker fee if you proceed with the mortgage through them (having paid for a Mortgage Capacity Report). If you proceed with Prestige Mortgage Solutions, we will waive any broker fee on your mortgage application.
Is the information in a Mortgage Capacity Report accurate?
If the Mortgage Capacity Report has been drafted by a qualified and experienced mortgage advisor, there is no reason for it not to be accurate.
Our mortgage advisors will take into account how much of a deposit you expected to have, your debt obligations and monthly payments, your retirement age, a full breakdown of your income and expected outgoings.
This will give them a good guide of what you may be expected to borrow when you come to apply for a mortgage.
However, the important thing to note is that criteria and lender’s calculations can change anytime, so what may be correct when drafting the report, may not be achievable in the future.
Also, every mortgage application is fully underwritten, and lenders will be looking at your credit file and personal documents doing their full due diligence.
It is not possible for a mortgage advisor to know the exact outcome of this process when drafting a Mortgage Capacity Report. However, we will be able to advise which lenders are more likely to accept your application on view of your credit report.
You can find out more about your own credit file by visiting credit reference agencies such as Check My File.
Do I need a mortgage broker for a Mortgage Capacity Report?
If you were taking a Mortgage Capacity Report to provide to a solicitor or judge to agree a financial settlement, it is important that it is accurate.
As a result, it will be needed to be drawn up by a qualified mortgage advisor that is regulated by the Financial Conduct Authority.
It is likely that it will be a requirement of the judge that this is the case too.
With the outcome of the process being so important, it is recommended that you look for a qualified mortgage advisor that has experience in arranging these reports already, who can understand your situation and guide you accordingly.
Mortgage Capacity assessment Reports are important documents when you are going through a divorce or separation.
They demonstrate to a judge or a solicitor what your mortgage capacity is so they can you get a good idea of what you may be able to afford once a settlement goes through.
As the document is to be used in court, it is important that they are drawn up by a qualified mortgage advisor with experience in arranging them.
If you would like advice from a fully regulated, qualified mortgage advisor that can talk to you about your situation and give you your options around Mortgage Capacity assessment Reports, please get in touch on 0330 135 8047 or book an appointment at https://prestigemortgagesolutions.co.uk/booking-page/