Using child maintenance in a mortgage application

Just as the term suggests, child maintenance is the money you might be receiving from a separated or divorced partner to support any children you have together. For that reason, it’s also called child support,  explains Citizens Advice, and is designed to help meet the living costs of your child or children under the age of 16.

Using child maintenance in a mortgage application is certainly possible – and can be done with success – but you may face additional questions from any potential lender about the source and reliability of that source of income.

Nevertheless, lenders appear to be adopting greater flexibility concerning maintenance income mortgages – whether you are looking to buy a new home or want to take on the mortgage repayments of the family home.

Damian Youell

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Can I apply for a mortgage using child maintenance income?

The simple answer is yes, you can. Before making any mortgage with maintenance payments application, though, you should be aware of the potential issues and how the consideration of these is likely to vary from one mortgage lender to another.

In the back of your mind, you will want to remember that any subsequently declined application is likely to adversely affect your credit rating, making it more difficult to raise credit or any loan in the future.

For that reason, you might want to increase your chances of success by consulting – at the earliest possible stage – an experienced mortgage broker who recognises the particular needs and circumstances of someone making a child maintenance mortgage application.

The child support you receive is likely to be considered by many lenders – although policies will vary across the board. For example, some mortgage lenders will allow the whole of any child support you receive to be reckoned as part of your ongoing income. On the other hand, some will give you credit for only half of what you expect to receive in child maintenance payments, while some may flatly refuse your application.

 

Why may it be challenging to get a mortgage with maintenance payments?

As with any mortgage application, it is all about your ability to repay the loan by making the monthly mortgage repayments as and when they fall due. And that will depend on the reliability and certainty with which you receive your monthly income.

Child maintenance is money you receive for the support of your child or children. But child maintenance is also something of an umbrella term because it embraces payments that might come from several different sources:

Family-Based Arrangements

  • these are probably the most common forms of arrangement whereby the absent parent agrees to make payments to the parent with care of the children for their upkeep;
  • although parents have a legal obligation for the upkeep of their children, the Law Superstore points out that family-based arrangements in themselves are not legally binding;
  • for any number of reasons, a family-based arrangement may break down – and the income on which the parent relied for child maintenance remains in jeopardy until an alternative method is secured;

Child Maintenance Service

  • that alternative source for securing child support is through the Child Maintenance Service (CMS) – which currently provides support for more than three-quarters of a million children;
  • the CMS has the authority to enforce child maintenance payments through formal Deduction from Earnings Orders and Requests, Deduction from Benefits, and court orders;

Court orders

  • you will have been unable to use the Child Maintenance Service if the parent from whom you are seeking child support lives outside the UK or if they are a highly paid individual with an income above a prescribed total;
  • currently, the maximum pre-tax income earned by the parent from whom you are claiming child support is £3,000 a week (or £156,000 a year);
  • you will need a specific court order to secure child maintenance payments from any such individual.

There are various means for having secured the child maintenance payments you currently receive and expect to continue to receive until the 16th birthdays of your children. The problem for mortgage lenders is the difficulty in establishing the reliability and regularity of such payments with any certainty.


Am I eligible for a child maintenance income mortgage?

Whether or not you are granted a child maintenance income mortgage will depend on the policies of the lender to whom you have applied. Those prepared to entertain your application might insist on specific conditions being met. For example, you might need to:

  • have more than five years remaining on any family-based arrangement;
  • have several years’ of bank statements that prove the amounts of child maintenance you have received in the past;
  • be prepared to regularly update your lender with proof of the continued receipt of child support throughout the mortgage term;
  • have a Child Maintenance Service (or its predecessor Child Support Agency) arrangement in place;
  • have your receipt of child maintenance payments secured through a court order.

In short, it is difficult to predict the ease – or otherwise – with which your child maintenance mortgage application is likely to be processed by any particular lender.

For that reason, it is worth reiterating the benefits of consulting an experienced, independent mortgage broker in advance of any formal application.


What else affects using child maintenance in a mortgage application?

Any mortgage lender will be looking not just at your current income – including whatever income from child maintenance payments its policies allow – but your ongoing income throughout the entire mortgage term.
Even when substantial credit is given for the income you are receiving by way of child support, any lender is bound to recognise that that particular source of income will end when the child or children reach the age of 16 (or 20 if they continue in full-time education or have special needs).
That time limit, of course, needs to be set against the fact that the typical mortgage term is between 25 and 30 years. You might need to explain how you will make good the future shortfall in income from child maintenance payments – for example, by providing a letter from your employer that you have arranged to extend your paid working hours.


Next steps

A mortgage with maintenance payments taken into consideration is certainly a possibility, and many lenders are likely to entertain your application. But bear in mind that any lender will have specific concerns – specifically, about the reliability of the arrangements that are in place to secure those payments and the period during which you will be relying upon them.

To avoid the unfortunate consequences of any premature application being turned down by a lender, you might want to draw on our advice and assistance here at NeedingAdvice.co.uk to identify the likely avenues of success and to steer you through any formal mortgage application.


FAQs – Child Maintenance Mortgages

Child maintenance mortgage application. Where do I start?

When it comes to making a mortgage application, the first thing to keep in mind is that different lenders have varying lending requirements when it comes to using your child maintenance payments. Some lenders will consider 100% of the child maintenance payments. Others may only consider 50-60%. Some lenders won’t even consider the income at all. There are also other factors that come into play. For example, how long you plan to receive the payments and whether you have an informal agreement in place or not will also affect the amount of money you can borrow.


Which mortgage lenders accept child maintenance?

Each mortgage lender has different lending criteria for child maintenance mortgages. Most lenders will ask for a formal agreement in place when adding child maintenance under Child Maintenance Service Assessment to the mortgage application.

For example, HSBC will take into account 100% of child maintenance in the mortgage application as income if you have a court order stating child support agency assessment and it must be evidenced over the term of this loan.

Barclays Bank can also account for 100% of child maintenance costs if you have court order evidence of child support agency assessment. However, they require a formal written agreement between you and your ex-spouse.

The same applies to Lloyds TSB could also allow 100% of child maintenance benefits to be used as income if there is a court order. They require a formal written agreement.

Nationwide bank could also account the 100% of the child support payments in the mortgage but it will need three months of the bank statement as evidence. It will also take a private arrangement, Child Maintenance Service Assessment or a court order, similar to other lenders.

If you are interested, you can always contact a mortgage broker to help in application with child maintenance mortgages.


What other factors come into play with a child maintenance mortgage application?

If you are applying for a mortgage, lenders will need to consider how much money you could potentially earn while still repaying the loan. For example, if you are currently paying child care costs, the lender will likely take into account how old your children are and whether you will continue to receive child maintenance after the loan is paid back. The lender will also look at what type of job you intend to get once you pay off the loan. This includes things like whether you will be working full time or part-time and whether you will be able to work from home. If you intend to move overseas, the lender will want to know where you will be moving to. Lenders will also want to see proof of any savings you have so they can determine whether you will be able to afford to repay the loan.

Having a formal arrangement in place means that child maintenance payments will not be considered as income when applying for a mortgage. Child maintenance payments should be provided to the lender either through a letter from the court or via the CMS. Some lenders will allow you to submit your payment history via bank statement. The lender may require evidence of your ability to pay back the loan, however, if you have a positive track record of paying back your loans. A broker can help you find out which lenders are willing to accept a track record.