How maintenance affects borrowing capacity

The asymmetry

Maintenance paid is almost always deducted in full, by every lender, as a committed outgoing. Maintenance received is treated far less consistently: some lenders count it in full, some at a percentage, some only if it satisfies conditions, and some not at all.

The practical consequence is uncomfortable but important to state: a maintenance obligation reduces the payer’s capacity by more than it increases the recipient’s. Two households sharing one income stream will, between them, support less borrowing than one household did. That is not a defect in anyone’s report; it is the arithmetic the case has to accommodate.

What determines whether maintenance received counts

Whether it is ordered or informal

Maintenance under a court order, or a properly recorded agreement, is materially more likely to be counted than an informal arrangement. Where the order is not yet made, that creates a timing problem — the report is being prepared to inform the settlement that will produce the order. Where that is the position, the report should say so and model the outcome both ways.

The remaining term

This is the decisive factor and the one most often overlooked. Lenders that count maintenance generally require a minimum period still to run — frequently expressed in years — before it will be treated as income at all. A maintenance order with a short remaining term may count for nothing.

In a financial remedy context that produces a direct and sometimes counter-intuitive interaction between the term of a maintenance order and a party’s ability to rehouse. A term order that ends when the youngest child finishes secondary education may be perfectly reasonable as a matter of substance and yet, if the remaining term is short, provide no support at all to the recipient’s borrowing.

Spousal versus child maintenance

Lenders distinguish between them, and not uniformly. Some treat child maintenance more cautiously because it is contingent on the children’s ages; others treat spousal maintenance more cautiously because it is more readily variable. A report that lumps the two together under “maintenance” is giving away accuracy for no reason.

Whether it is actually being paid

An order is not evidence of receipt. Where maintenance is relied on, lenders will generally want to see it landing in the bank account, typically over a period of months. This matters practically: a party who has an order but no payment history may not be able to rely on the income yet, even though the order exists.

The circularity problem

This is the difficulty that makes maintenance different from every other variable in a capacity report:

• What each party can borrow depends on the maintenance that will be paid and received.
• What maintenance is appropriate depends in part on each party’s housing need and what they can borrow.

There is no way to break that circle with a single figure, and a report that pretends otherwise has picked one side of a contested assumption and buried the choice.

The workable answer is scenarios. Instruct the report to model the two or three maintenance outcomes genuinely in contention — for example, no spousal maintenance; £X per month for five years; £X per month until the youngest child is eighteen — and set out the capacity for each party under each. What the parties then have is a matrix showing which combinations of maintenance and capital actually permit both households to be housed. That is a negotiating tool rather than a debating point.

What to put in the instruction

For each maintenance stream in issue, tell the reporter:

• whether it is spousal, child, or both, and the amount of each;
• whether it is ordered, agreed and recorded, or informal — and if ordered, the date and the term;
• the remaining term, in years and months;
• whether payment has actually been made, and for how long, with statements if so;
• whether any of it is due to step down or end on a specified event.

And where the maintenance position is exactly what is in dispute, give the alternatives as numbered scenarios rather than asking the reporter to assume one. The letter of instruction guide sets out how.

A caution

Lender treatment of maintenance changes, and it varies more widely than almost any other criterion. Any statement about “what lenders do” is a statement about a particular market at a particular date. That is why a capacity report should carry the date of the analysis on its face, and why a report more than a few months old should be refreshed before it is relied on at a hearing.