While the divorce rate in the UK is decreasing overall, divorces among the over 60s are unfortunately increasing. Divorce in later life can have a huge impact on personal finances, especially at retirement age. What’s more, splitting assets and wealth during divorce can be a difficult and stressful process.
After several years of accumulating wealth, older couples tend to have assets of a higher value and their home is typically the most valuable asset that needs to be split.
Equity release can provide multiple solutions to splitting property wealth and more and more people are turning to lifetime mortgages to facilitate a divorce – almost one in 10 equity release borrowers are divorced or separated.
For example, if the marital home is being sold, equity release can help both parties with their onward property purchase. Or, if one person is staying in the marital home, they can release equity to provide a share of the divorce settlement.
Take a look at these two scenarios that demonstrate how equity release can facilitate a divorce settlement:
Releasing Equity from the Marital Home
A married couple in their mid-60s were getting a divorce.
The wife wanted to move out of the martial home and purchase a new property, and the husband wanted to stay in the home.
They came to a financial agreement to split the property 50:50 and raise funds using equity release on the marital home.
There were 3 solicitors involved; the wife’s divorce solicitor, the husband’s divorce solicitor, and an equity release solicitor who worked together to reach a conclusion.
Due to the husband’s age, and the value of the property, we were unable to release 50% of the property value and so the husband made up the shortfall from his personal savings.
He plans to make interest repayments on the equity release mortgage to avoid compound interest and retain as much equity in the property as possible.
Using Equity Release for a New Property Purchase
A couple were getting a divorce and looking to sell their marital home to buy a new property each.
The proceeds from the sale afforded them £200,000 each, although the properties they were looking to buy were approximately £350,000 each.
Due to a lack of income and their age, neither of them were able to secure a mainstream mortgage on their new properties to bridge the £150,000 shortfall.
After exploring all other options, they both took an equity release loan secured against their new properties, which enabled them to successfully complete the onward purchases.
In this case, both parties were able to maintain their status as homeowners, and their standard of living following the divorce.
These are just two examples of how equity release can facilitate and simplify the division of assets during a divorce or separation. While equity release can play a significant role in a divorce settlement, there are many factors to consider, and it is not suitable for everyone.
To learn more about equity release please feel free to give us a call. We are independent equity release brokers, and we compare equity release products to find the most suitable plan for your needs.
Our qualified equity release specialists are on hand to answer any questions you may have and to provide impartial advice.
We look forward to helping you on your equity release journey.