What is a Mortgage Capacity Report?

If you have been advised to supply a Mortgage Capacity Report, also known as a Mortgage Assessment Report, you may be scratching your head wondering what is a mortgage capacity report? You may have heard of an agreement in principle, or mortgage offer. Well, this is different.

In this insight, we are going to explain the details, provide possible alternatives, and answer any questions you have. Including whether a mortgage promise can work as a viable and cheaper alternative.

Key Takeaways

• A Mortgage Capacity Report is a document used in court to understand a person's ability to borrow money for a mortgage, often during divorce proceedings.
• The report includes details about a person's existing mortgage, estimated property value, income, affordability, investments, and pensions.
• The cost of the report varies depending on the provider, starting at around £175 for a basic report.
• The report can help to ensure a fair outcome during financial settlements, assess different financial scenarios, and save money in legal fees. Alternatively, a Mortgage adviser can provide letters of affordability or agreements in principle.

What is a Mortgage Capacity Report (MCR)?

A Mortgage Capacity Report (MCR) is a document that provides details about a person's ability to borrow money for a mortgage. This report is often requested as evidence in court, especially during divorce proceedings, to determine if it is feasible to buy out a partner's share of a property. The MCR can give insight into lending possibilities in scenarios that the person is not currently in.

Mortgage Capacity Report Example

John and Jane are married and own a home together. They are considering getting a divorce, and one of the issues they need to resolve is how to divide their assets, including their home. John wants to buy out Jane's share of the property so that he can keep the house, but he's not sure if he has the financial capacity to do so.

To help determine John's mortgage capacity, he might request an Mortgage Capacity Report from a lender or mortgage adviser. The Capacity Report would analyse John's financial situation and other factors that could impact his ability to secure a mortgage.

Based on the results of the MCR, John would have a better understanding of his borrowing power and whether or not he would be able to afford to buy out Jane's share of the property. This information could be useful in negotiations with Jane and in court if required.

Mortgage Capacity Report Scenarios

When requesting a Mortgage Capacity Report, you will have the option to re-assess your mortgage affordability based on several scenarios. Decide upfront which scenarios need to be considered.

Examples of possible scenarios include:

• Introduction of maintenance payments (either paying, or receiving).
• Increased child care costs.
• Changes to benefit payments.
• Changes to working arrangements.
• Increased borrowing on other accounts, e.g credit cards/personal loans

There are many different scenarios that can be included in your report. It is likely only a few will be required.

Are Mortgage Capacity Reports Regulated?

A Mortgage capacity report is not an FCA-regulated product, which means it's not entirely reliable and does not provide financial consumer protection. If there are changes in a person's circumstances or a lender's criteria, the accuracy of the report may be affected. For example, if a lender changes its lending policy, it may impact the credibility of the MCR.

What does a Mortgage capacity report contain?

The Mortgage capacity report can be built to your requirements. It can include detail of:

• Your existing Mortgage details, including the amount outstanding.
• Your estimated property value.
• Your income details.
• Mortgage affordability details, for example, how much you can borrow on a new mortgage.
• Your investment, savings, and pension details.
• How your mortgage affordability will be impacted by a potential divorce or separation.
• Different relevant scenarios that may be required.

The MCR can be customised to assess different scenarios that could affect your ability to pay your mortgage. You can choose which scenarios you want to be considered in the report.

How much does a Mortgage Capacity Report cost?

The cost of the report is going to vary between brokerage firms. You can expect to pay from £175 for a basic report and onwards for a more comprehensive report. A joint report can cost around £300.

What are the benefits of using a Mortgage Capacity Report?

The Mortgage Capacity Report will provide information about your Mortgage options post-divorce. There are benefits to having this information available during court proceedings.

Benefits include:

• A fairer outcome during financial settlements
• You are able to assess different financial scenarios to ensure they are possible.
• It could save you further money in legal fees.
• Some firms agree to provide representation at court if the report is questioned.

What are the alternatives to a Mortgage Capacity Report?

Sometimes you may just need to know what is possible or not post-divorce. Obtaining a Mortgage Capacity Report may not always be required in court. There are Mortgage advisers who will provide letters of affordability or agreements in principle that can tell you how much you will be able to afford. If you are just exploring your options, this may be a more suitable outcome for you than obtaining a Mortgage Capacity Report. 

Obtaining a mortgage promise will be quicker and cheaper. However, it may not stack up in court. Be aware, that the Mortgage promise/agreement in principle is not a guarantee, it is a guideline to how much you can borrow. 

Where can I get a Mortgage Capacity Report?

The Mortgage Capacity Report (MCR) is a report that's created by Mortgage advisers. It's important to note that not all advisers offer this service, but it's becoming more common.

If you're unsure where to start with finding a mortgage capacity report, you can complete the Sunny Fact Find for mortgage advice. The answers you provide help us to find the best-suited adviser for your needs. Your adviser then contacts you to discuss how they can help. You decide how to proceed.