What is a Mortgage Capacity Report?
Your home may be repossessed if you do not keep up repayments on your mortgage.
All information was accurate at the time of publication.
15th July 2024
As a mortgage advisor, I've had the privilege of working with many clients throughout my career. Early on, I noticed a crucial need for strong relationships between family lawyers and mortgage professionals, especially when clients are navigating divorce.
Let's face it, divorce is an incredibly stressful experience. In recent years, mortgage capacity reports have become a standard part of the process for divorcing couples. These reports play a vital role, but it's important to understand what they do (and don't do) to ensure a smooth transition.
That's where my expertise comes in. With years of experience crafting mortgage capacity reports, I'm here to guide you through the process. I understand the sensitivity of the situation, and I'm dedicated to putting you at ease and ensuring your financial well-being throughout this difficult time.
In this blog, we'll delve into everything you need to know about mortgage capacity reports, starting with the basics: what they are and what they can (and can't) tell you.
What is a Mortgage Capacity Report?
In my work, I often hear from family lawyers whose clients need a Mortgage Capacity Report (MCR). But what exactly is an MCR?
An MCR is a crucial document used in divorce proceedings that go to court. It helps divorcing couples understand their ability to secure a mortgage after the separation. The report assesses two key factors: how much you might be able to borrow and the monthly costs associated with that loan. This information can be instrumental for the courts when deciding on important matters like spousal maintenance or the division of marital home equity after its sale.
What makes up a Mortgage Capacity Report?
Let's break down your Mortgage Capacity Report (MCR) step-by-step.
First, I'll introduce myself and explain how my experience qualifies me to create your MCR. As a mortgage advisor since 2009 and owner of my own brokerage since 2019, I've helped many clients navigate this process. I'll also go over the documents you've provided, such as proof of income and bank statements, to confirm everything is in order.
Next, we'll delve into the scenarios we discussed during our consultation. Whether it's adjusting work hours due to childcare or factoring in child maintenance costs, we can analyse multiple scenarios (usually 2-4 on most reports) to give you a comprehensive picture.
Once we know which scenarios we are looking at, we can look at what lenders are able to help and what products they are offering. I can provide illustrations for these mortgages and send them with the report. These illustrations are only valid on the date they are produced, but they certainly give an indication of what you would be able to apply for in the future.
Transparency is key, so I'll also outline any limitations to the report. For example, if a credit report or completed budget planner isn't available, I'll note that in the MCR.
What is the process of getting a Mortgage Capacity Report?
Once your family lawyer gives me the go-ahead, I'll contact you to schedule a convenient 30-minute chat. We can do this over the phone, Zoom, or Teams – whichever works best for you.
Treat the appointment like you're hoping to apply for a mortgage, but focused on your specific situation. I'll introduce myself and explain my role. Then, we'll delve into the details needed for a typical mortgage application. You'll have a chance to explain your goals and financial picture – things like your job, income, expenses, and so on.
We'll use an affordability calculator to estimate your borrowing potential. Then, I'll tap into my mortgage sourcing software to show you what different mortgage options might cost, including fees like arrangement, survey, and legal fees.
After our chat, I'll draft your MCR and send it to you and your lawyer to review. You can make sure everything looks accurate, and I'm happy to make any adjustments needed. Once everyone is on the same page, I'll finalise the report and send it off to you both. And if your circumstances change down the line, we can always update the report to reflect that.
How much does a Mortgage Capacity Report cost?
When it comes to Mortgage Capacity Reports, I have to put as much effort into them as I would a mortgage application. These reports are often provided to the courts and I need to be able to stand by the advice I give. This means that I have to spend a significant amount of time preparing the report so that it is as accurate as possible.
I charge £250 for a Mortgage Capacity Report.
My typical fee for a mortgage application is £495.
If you come back to me for your mortgage after I have completed the Mortgage Capacity Report, I will only charge you the £245 difference, so you are not out of pocket.
There is no VAT for any of my services, as certain financial services are VAT exempt.
You will be provided with an invoice for my work.
What happens if the Mortgage Capacity Report doesn’t give the answers I wanted?
Let's be honest, the numbers might not always paint the picture you were hoping for. You might find the borrowing amount falls short of your initial expectations, or the monthly payments might seem a little tight. My role is to present the facts clearly, but that doesn't mean there aren't ways to navigate this.
For example, we can explore adjusting the mortgage term to make the payments more manageable. We can also see if a slightly bigger deposit pushes you into a more favorable loan-to-value bracket, potentially lowering the interest rate.
Remember, this is a dynamic situation. If you plan to pay off some debt soon or anticipate receiving a gift, we can factor that into the report and update your borrowing potential. In the short term, renting might be a suitable option while things settle with the divorce. Once the dust settles and you have a clearer financial picture, we can always revisit your mortgage options and find the best fit for your future.
Your lawyer also plays a key role. Their efforts might secure you more spousal maintenance, or potentially reduce what you pay out, further influencing your borrowing power. Here's the bottom line: I'm on your team. We'll explore every avenue to help you achieve your goals.
Going through a divorce can be stressful, and figuring out your mortgage options shouldn't add to that burden. If you're considering a mortgage capacity report, I understand you might have questions. I'm here to help! Just fill out the contact form below, and I'll personally reach out by phone and email within 24 hours to discuss your situation and how a mortgage capacity report can benefit you.