You wait patiently, and then two busses come along at once. Whole of Market or Independent Mortgage Advisers are currently seeing two buses arriving at once.
The new “no-fault” divorce rules and the resurgent Mortgage Capacity Reports.
We’re all looking for additional income streams to increase our revenue or find supplementary fee-charging advice models that are recession and housing market proof.
You could start promoting Mortgage Capacity Reports to your clients. Let me remind you what they’re all about and the market for this advice.
When couples divorce after years of marriage or civil partnership, their assets, income, and liabilities are entwined. Separating the two people requires that these items are split equally and fairly. You must prove that the division is correct, whether you agree to divide these amicably or via professional mediators, who act as facilitators, or the courts.
IFAs have produced pension reports which show how much money each party has in their various pensions. Valuers will assess the cost of a home to determine that asset price. Accountants will report the current future income capability of self-employed or owner directors. Credit Reports are completed to show any debts and the share of these.
We need to know how much each partner can borrow on a new mortgage to complete the equation. That’s where the Mortgage Capacity Report comes in.
How is this different from a printed Decision in Principle?
- Firstly, they cost money – typically, advisers charge anything from £200 to £500 for a report for an individual or two people. DIPs are free.
- Secondly, they are much more detailed, often showing future mortgage capacity and current. They consider debts, expenditures and deposits and show how much can be borrowed and the cost. Some will have a few lenders to consider as well.
- Thirdly, they are created by highly qualified individuals. One I saw recently online was created by a Chartered IFA, who also had the requisite mortgage qualifications. The entire first page showed her qualifications and experience. Acronyms and initials flowed across the sheet. This creates a trusted report which will be readily shared and relied upon by other professionals. A printed DIP does not. This expertise allows the reports to adhere to Part 25 of the Family Procedures Rules set out by the Ministry of Justice.
- Fourthly, they investigate the future as well. So, an equity release angle is sometimes projected, especially if the divorcing couple are silver divorcees. An amicable term for those over 60 divorcing.
- Finally, they consider all the other decisions made by the divorcing couple to create the story. The property value, maintenance payments, investment splits, pension divisions, and outstanding mortgage. All this information is needed upfront.
They are DIPs on steroids and backed up with your professional expertise and reputation. And they will hold out in court. Some authors of these documents can also attend court if the financials are being disputed by highly paid lawyers on behalf of their clients. Thus, a fair financial settlement can be agreed upon.
How can you start offering these? There is absolutely no reason you can’t. So long as you are qualified and experienced in your mortgage field, ideally fully qualified – equity release, advance mortgage and CeMAP – you can produce a report. You’ll need a template and a procedure to gather the information. If Directly Authorised, you’ll need to consult with your compliance experts. As an Appointed Representative, your network or principal firm will have guidelines. Your Professional Indemnity cover will need to be highlighted; after all, your advice will be relied upon in a Family Court. Talk to your compliance people, chat it over with the systems support, and plan.
Mortgage Capacity Reports are a reliable service for clients, an additional income stream. The number of divorces is predicted to increase with the “no-fault” laws, which started in April 2022. They are an excellent business generation tool which will also lead to some crucial new mortgage clients.