What is a Mortgage Capacity Report?
A Mortgage Capacity Report is a detailed financial document that confirms how much an individual can potentially borrow from Mortgage Lenders based on their personal income, financial commitments and credit profile.
Unlike a simple mortgage in principle (MIP) which is with just one Lender, Mortgage Capacity Reports take a view of the whole market and are tailored to suit the specific requirements of legal or court proceedings.
These are usually required as part of Divorce proceedings at the Financial Dispute Resolution stage.
Why is a Mortgage Capacity Report Required?
In the UK when couples go through divorce or dissolution of a civil partnership, the splitting of assets and liabilities becomes a key part of the process.
The Courts need to understand the borrowing potential of each party to ensure a fair settlement. Mortgage Capacity Reports provide this insight from a suitably qualified professional, such as a Mortgage Advisor.
It is important that Mortgage Capacity Reports are an accurate reflection of the individuals true Mortgage Raising Capacity as in many cases, the report will directly impact the settlement decided by the courts.
A Mortgage Capacity Report helps to answer key questions:
- Can one party afford to buy the other out of the family home?
- Can both parties afford to purchase separate properties?
- How much financial support or equity is required to enable rehousing?
This document is particularly important when children are involved, as the court prioritises the housing requirements of the childrens primary caregiver.
If you would like advice and guidance on how to manage your finances following a separation, please visit the Governments money helper webpage for divorce and separation (link: https://www.moneyhelper.org.uk/en/family-and-care/divorce-and-separation)
What Does a Mortgage Capacity Report Need to Include?
An accurate Mortgage Capacity Report should be comprehensive and based on realistic and verified assumptions.
The following requirements are usually provided by the Courts:
(i) the information the calculation is based on;
(ii) the maximum mortgage that the broker believes she will be able to secure;
(iii) the term of that mortgage; and
(iv) the repayments that would be required on that mortgage on a repayment and interest only basis.
This will usually translate into the following information contained within the report:
- Personal details: Name, age and retirement age
- Income details: Breakdown of income sources, including employment, self employment, benefits, pensions, and investment income
- Outgoings and financial commitments: Monthly obligations such as credit card balances, loan/finance repayments, child maintenance and sole living expenses.
- Credit history: Any relevant credit issues, CCJs or defaults
- Affordability assessment: Calculations based on the Lenders criteria
- Repayment on the applicable Mortgage: Details of what the repayment will be based on your Mortgage Capacity on a capital repayment and interest only basis
- Advisor commentary: Explanations from a qualified Mortgage or Financial Advisor.
It should be signed and dated by the Advisor who will also confirm that they are qualified and regulated by the FCA.
Types of Mortgage Capacity Reports
There are several types of Mortgage Capacity Reports, depending on the needs of the parties and the court.
- No Mortgage Capacity Report
A report or certificate which confirms that the individual or individual are unable to obtain a Mortgage.
This could be due to a lack of income, excessive outgoings or adverse credit.
- Single Mortgage Capacity Report
A Single Mortgage Capacity Report is prepared for one individual and details their potential borrowing capacity. It considers their specific financial profile and is the most common type required during divorce proceedings.
It is useful when:
- One party intends to buy the other out.
- One party wants to show they cannot afford independent housing.
- The court requires individual financial clarity.
- Joint Mortgage Capacity Report
This report assesses the Mortgage Raising Capacity potential of two individuals applying for a mortgage together. It is less commonly used in divorce proceedings but may apply in certain scenarios:
- Where ex-partners intend to co-own a property
- Where a party intends to purchase with a new partner or family member.
How to Obtain a Mortgage Capacity Report
Obtaining a Mortgage Capacity Report is a straightforward process but requires engagement with a qualified Mortgage Advisor who has the relevant experience of providing capacity reports for Court/FDR purposes.
The process will typically be as follows:
- Initial consultation: The advisor will gather your personal and financial details.
- Assessment: The advisor will make a mortgage capacity assessment on your affordability based on criteria from multiple lenders.
- Drafting: The findings are compiled into a professional document.
- Final report: The report is signed, dated, and ready for use in court.
Your family law professional (link: https://resolution.org.uk) will then check the Mortgage Capacity Report and ask any questions.
Typical turnaround times range from 1 to 3 working days depending on complexity.
Bespoke Mortgage Capacity Reports
A bespoke Mortgage Capacity Report is tailored for complex or multiple scenario cases where additional considerations are required. These may include:
- The applicants Mortgage Capacity with or without a particular income or debt
- Self employment with variable income, depending on the forecast of the applicants business
- Differing deposit amounts the applicant may have available
These reports often require more detailed analysis and include multiple calculations that the Mortgage Advisor has to make.
Who Can Complete My Mortgage Capacity Report?
Only a qualified, FCA-regulated Mortgage Advisor or Financial Advisor with experience in completing Mortgage Capacity Reports for Court purposes should complete your report. Ideally, they should:
- Hold CeMAP (Certificate in Mortgage Advice and Practice) or equivalent qualifications
- Be familiar with lender criteria and the court expectations
- Offer regulated advice and be a practicing Mortgage Advisor
- Provide a legally credible document that can withstand court scrutiny
Avoid free options, as these will typically be rejected by the courts.
Instead opt a for a comprehensive report from a Mortgage Advisor who will consider the whole market.
What is the Difference Between a Mortgage in Principle and a Mortgage Capacity Report?
A Mortgage in Principle (MIP) is an estimated from a specific Mortgage lender indicating how much you might be able to borrow. It is usually generated after a credit check and based on limited information.
A Mortgage Capacity Report is:
- More comprehensive
- Tailored to court use
- Takes into account a full financial picture
- Written by a qualified professional
- Specifically for the Courts during a divorce/separation proceedings
MIP’s will always be rejected by the courts when presented as an alternative to a Capacity Report.
Frequently Asked Questions
- How much does a Mortgage Capacity Report cost?
According to UK Mortgage Advisors (link: https://www.ukmortgageadvisors.co.uk/mortgage-capacity-report/ ) costs vary depending on the advisor producing them and typically range from £129 all the way up to £800. Bespoke reports may cost more. Always request a quote in advance.
- Will this affect my credit score?
No. The report is based on soft searches and lender criteria. No hard credit checks are performed unless a lender application is made.
- Is the report legally binding?
No, but it is considered strong evidence in court and can influence financial decisions.
- How long is the report valid?
Typically 3 to 6 months, as lender criteria and your circumstances may change.
- Can I use it to get a mortgage later?
Not directly, but it forms the basis of advice. You will still need a full application for a mortgage later.
Final Thoughts
Mortgage Capacity Reports are vital in ensuring fair outcomes during divorce proceedings.
Whether you are seeking to stay in the family home, relocate, or secure financial independence, obtaining an accurate and professional produced report is invaluable.
By engaging a qualified advisor, you can present your case with confidence, backed by expert financial evidence.
Disclaimer: This guide is for informational purposes only and does not constitute legal or financial advice. Always consult with a qualified solicitor and Mortgage Advisor.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH REPAYMENTS ON YOUR MORTGAGE
