Child Maintenance in a Mortgage Application | Expert Advice

Today, we’re going to talk about something called ‘Child Maintenance in a Mortgage Application.’ Imagine you have a piggy bank where you save money from your allowance.

Now, think of a mortgage as a special kind of ‘big purchase’ piggy bank that adults use when they want to buy a house. They save money and also borrow some from a bank to fill this big piggy bank until they have enough to get the house.

But what if a parent is receiving money to help take care of their children? This is called ‘child maintenance.’ It’s like getting an extra allowance to make sure you have everything you need, like clothes, food, and toys. Some parents might wonder if they can use this extra money to help them get a mortgage for a new house.

In our guide, ‘Child Maintenance in a Mortgage Application,’ we’re going to explain how parents can use this extra helping money when they want to buy a house. We’ll talk about what ‘mortgage for child maintenance’ means, how ‘child maintenance’ can help in getting a mortgage, and what ‘child maintenance mortgages’ are all about. It’s important for families to know all their options, and we’re here to make it as easy as understanding your ABCs!

So, let’s dive in and learn together how child maintenance can help families in their journey to buying a dream home!

Post Topics

Using child support in a mortgage application

Can I apply for a mortgage using child maintenance income?

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

Am I eligible for a child maintenance income mortgage?

What else affects using child support in a mortgage application?

Next steps

FAQs 

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.

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 be 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 16^th 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 statementsA record of a borrower's financial transactions often requir... 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 support 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 steer you through any formal mortgage application.

FAQs – Child Maintenance Mortgages

How does a child maintenance payment affect my mortgage application?

When you apply for a mortgage, lenders look at your financial commitments, including child support payments. These are considered regular outgoings, which can affect your mortgage affordability. Lenders will assess your ability to manage mortgage repayments alongside your child maintenance obligation. Providing months of bank statements can help lenders understand your financial situation better.

Will my credit score impact my ability to get a mortgage with child support income?

Yes, your credit score is a crucial factor in a mortgage application. Lenders use it to assess your track record of managing credit and making payments on time. A good credit rating can positively influence your choice of lender and the mortgage deals available to you, even when child support income is considered.

What role does the Child Support Service or Child Support Agency play in my mortgage application?

The Child Support Service or Child Support Agency can provide formal documentation of your child support payments. This is important for lenders when considering child maintenance as part of your income. A formal agreement or record of payment can strengthen your mortgage application by showing a reliable additional income stream.

Should I seek legal advice or professional advice when including child maintenance in my mortgage application?

Yes, obtaining legal advice or professional advice from a mortgage adviser can be beneficial. They can offer guidance on how to effectively include child maintenance income in your application and advise on the impact of different types of income, including child benefit payments, on your mortgage prospects.

How do lenders view formal agreements versus informal arrangements for child support?

Lenders generally prefer a formal arrangement for child support, evidenced by a court order or an agreement through the Child Help Service. This provides a more reliable indication of regular income. Informal arrangements, while still considered, may require additional proof, such as bank statements showing consistent payments.

Can additional income, like child benefits or tax returns, affect my mortgage application?

Yes, additional income sources, such as child benefit payments or income declared on tax returns, can positively affect your mortgage application. They increase your total income, which can improve your mortgage affordability. It’s important to declare all types of income to your mortgage lender during the application process.

What financial arrangements should I consider when applying for a joint mortgage with child maintenance income?

When applying for a joint mortgage, consider all household incomes and outgoings, including child maintenance income and obligations. Both parties should disclose their financial arrangement, including any child maintenance payment or child support allowance, to accurately calculate mortgage repayment affordability.

How is child maintenance calculated and considered by mortgage lenders?

Child maintenance calculation typically considers the non-resident parent’s income, the number of children, and the time children spend with each parent. Lenders consider child maintenance income if it’s consistent and reliable, often requiring a formal agreement or several months of bank statements as proof of regular payments.

What costs should I be aware of when considering a mortgage with child maintenance?

Be mindful of the cost of housing, childcare costs, everyday living costs, and any additional costs like school feesExpenses for private school education that may affect a borr... or costs related to raising a disabled child. These expenses can affect your overall affordability and should be considered alongside your mortgage repayment and child maintenance obligations.

How can I ensure a clean break while managing mortgage and child maintenance commitments?

A clean break is a legal arrangement that separates financial ties between divorced or separated couples, which can include agreements on mortgage payments and child maintenance. It’s advisable to seek formal advice to ensure that all financial arrangements, including any joint mortgage or child support commitments, are clearly defined and agreed upon, ensuring both parties understand their obligations and rights.