DIVORCE AND THE RECESSION
Article by Susan Alexander 30th November 2009
As the recession continues to bite, divorcing couples may be particularly affected by volatile financial circumstances. Often the matrimonial home is the largest asset and there may be unexpected consequences for couples needing to re-mortgage or sell the house to provide a home for each of them.
A stagnant housing market may mean that selling takes longer than expected leaving some separated couples living apart under the same roof. Those divorcing on the grounds of 2 year separation will need to satisfy the judge that they have indeed been living apart albeit under the same roof, if they want this time to count towards the 2 year period.
Stricter lending criteria and an anticipated rise in interest rates are sure to create difficulties for divorcing couples who need to stretch themselves financially to buy 2 homes from the proceeds of one particularly if the plan is for both parents to be fully involved in the care of the children.
Some specialist mortgage products will lend on higher multipliers of income and a number will allow maintenance to count as income. However, these specialist products are viewed as higher risk and have become more difficult to obtain as bankers are tightening their requirements to protect themselves against allegations of reckless lending.
Selling the family home subject to a fixed term mortgage can also mean having to pay an early redemption penalty.
However it's not all doom and gloom. On a positive note it is likely that the new properties which are purchased will have been equally devalued by the drop in housing prices and as there is apparently a shortage of family homes going on the market the demand for the family home may outstrip the demand for smaller properties. The availability of affordable housing through co-ownership schemes has given another option to divorcing couples who might not otherwise be able to afford get back on to the housing ladder.