If you’re getting divorced and receive child support, whether or not the child maintenance you receive will be classed as income depends on the mortgage lender you’re with. Some banks will take 100% of your child support into account once it’s been paid for a few months, others ignore it altogether. Find out if child support is counted as income by mortgage lenders.
Is child support counted as income by mortgage lenders?
I contacted 13 of the major mortgage lenders and asked them whether or not they took child support payments into account when working out whether or not to let someone take out a mortgage. I didn’t contact all of them, but tried to get in touch with a good cross section of mortgage lenders. This is what they told me:
These lenders don’t count child support payments as income
One or two mortgage lenders don’t count child support as income when working out how much to lend you. They include:
- Coventry building society: doesn’t currently consider child support as income for a mortgage.
These lenders count part of your child support as income
At least two lenders/lending groups will accept a percentage of child support payments as income if backed by a court order or Child Support Agency (CSA) payment plan. Some lenders also accept a statutory Child Maintenance Service plan as well.
SAVVY TIP: The Child Maintenance Service is the agency that has taken over from the Child Support Agency.
- Lloyds Banking Group: Takes 60% of the level of child support into account backed by a court order, CSA payment plan or three months’ bank statements showing payments have been made.
SAVVY TIP: This group accounts for a large part of the mortgage market as it includes Lloyds bank, Halifax and Bank of Scotland.
- Yorkshire building society: will take into account 50% of the value of any child maintenance payments, provided it is evidenced by a court order or consent order, a Child Support Agency or Statutory Child Maintenance Service payment order, or a solicitor’s letter confirming payments. The maintenance must have a minimum of two years remaining. They also require evidence from the most recent bank statement to show the payment had been made.
- Clydesdale and Yorkshire Banks: Do not generally take child support into account as income when assessing someone’s application. However they will look at borrowers on a ‘case by case’ basis. Even where they will accept child support, it must be backed by a CSA or or Child Maintenance Service (CMS) payment order or court order.
These lenders take child support into account with a court/CSA or CMS order
Several lenders will take all of the child support value into account when assessing income, but only if it’s being paid by a CSA payment order or court order.
- Cambridge building society: Takes child support into account if it is backed by a court order or CSA payment order, and would also want to know that payments are being maintained and are sustainable. They may make an exception to the above if there is a good track record of payments.
- Co-operative Banking Group: Will take 100% of child maintenance income into consideration, provided this is covered by a court order or CSA/Child Maintenance Service (CMS) documentation. They would also want to know that payments are being maintained and are sustainable and so the age of the child would be taken into account.
- Metro Bank: Takes child support into account if it is backed by a court order, and would also want to know that payments are being maintained and are sustainable.
- Virgin Money: Takes child support into account if it is backed by a CSA or CMS payment order or court order, if they have been in place for at least two years before the start date of the mortgage.
These lenders take child support into account without court/CSA or CMS order
Several lenders take a more flexible approach, including those listed below.
- Barclays: Takes child support into account as long as it is accompanied by a court order or if payments have been received continuously for 12 months.
- NatWest/RBS: Takes child support into account on a case-by-case basis. It doesn’t necessarily insist on a CSA, CMS or court order, but it would want to know that payments would be sustained. It may ask for evidence that payments have been received over the last six months.
- Post Office: Does take child support into account. It would need to see a copy of the court order, a maintenance assessment letter from the Child Support Agency, a written private agreement drawn up by the parents and the three most recent bank statements, showing that the person applying for the mortgage had received child support payments.
- Santander: Takes child support into account and would want to know that it had been paid for at least three months (this would need to be by standing order or phone/online payment so it would show up on a bank statement).
- Tesco Bank: Takes child support into account and would want to know that it had been paid for at least three months (this would need to be by standing order or phone/online payment so it would show up on a bank statement).
How can child support be paid?
Child support can be paid in several different ways:
- Through a private arrangement between the parents,
- With a solicitor’s letter backing up the private arrangement,
- Through the CSA (Child Support Agency) or CMS (Child Maintenance Service). The Child Maintenance can either calculate the amount of child support payable or take payments as well.
- Via a Court Order. Only a minority of couples get a court order as you can only go to court to arrange the payment of child support in very limited circumstances, such as if it is to pay school fees, if one parent lives overseas or if other aspects of the divorce are being decided in court.
Why does this matter?
The work of the Child Support Agency has been replaced by the Child Maintenance Service (CMS), and, sometime after the end of the year. Alongside the CMS taking over child support cases, a government policy was introduced to encourage more parents to make private arrangements. The idea is that it’s less confrontational and cheaper. The CMS charges parents who use its services to collect child support payments (except in cases involving domestic violence, young parents or those in Northern Ireland).
SAVVY TIP: The fees are a £20 registration charge, a fee of 20% of the child support charged to the parent paying it and a fee of 4% to the parent receiving it.
Nigel Shepherd, spokesman for the family lawyers’ organisation, Resolution, says that mortgage lenders should support parents’ decisions to arrange child support privately “We would want lenders to be consistent and support this objective. Privately agreed child support payments should be accepted as relevant income rather than requiring parents to go to the CMS, which costs both parents additional money and risks creating unnecessary conflict.”
And leading mortgage expert, Ray Boulger of brokers John Charcol, says mortgage lenders are being illogical: “As Government policy is to encourage the parties to come to a private arrangement for maintenance payments, a policy being reinforced by the CMS under plans to impose charges on both parties when its services are used, it is illogical for lenders to discriminate against applicants who are able to agree terms for maintenance without involving the Court or the CMS.
What can you do?
If you are getting divorced or you know your marriage or relationship is going wrong, here’s what I’d suggest you do:
1. Check your mortgage lender’s policy on accepting child support payments.
2. Get advice from an independent mortgage broker (one who can arrange a mortgage with any of the mortgage lenders on the market and not just a handful). He or she will tell you what your options are. Some may charge a fee for this advice but most will only charge you if you take out a mortgage with them.
3. Arrange your child support payments by standing order so they show up on your bank statements, don’t use cash payments if you can as they won’t be accepted as income.
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