A new and rather unusual expression has recently emerged which is the term – ‘silver splitters’. It hasn’t made the Oxford Concise Dictionary yet, but I suspect it’s just a matter of time!
Figures released by the Office for National Statistics (ONS) for the year 2011 reveal that 8% of all men divorcing in the UK were aged 60 and over. The equivalent figure for women aged 60 and over was 5%. Compare this to 2001 when these figures were 4.6% and 2.6% respectively.
While overall figures for divorce have been falling, divorce amongst the retired and elderly have been increasing significantly, resulting in financially strained circumstances for many at a time when they should be enjoying life.
This increase in the number of silver splitters appears to be the result of the ‘baby boomer’ generation reaching retirement, experiencing the empty nest syndrome with children departed, looking at each other and deciding that they have little in common. Matters take their course and separation is followed by divorce.
Next follows the murky area known to the legal profession as ‘ancillary relief’ which is quite separate from the divorce itself (or ) and is concerned with the financial settlement between the parties. In the absence of an amicable agreement the family court can dictate how the assets in the marriage are shared out, and that includes the matrimonial home irrespective of whose name is on the deeds.
This is where help from equity release can come into play to facilitate the financing of any payment between the divorced parties and to alleviate the prospect of poverty and homelessness for either ex-spouse.
Silver Splitters Case Study
Let us take an example. A couple, both aged 65, jointly own a property valued at £300,000 and they have paid off their mortgage. They decide to divorce but the wife wishes to remain in the family home and as the split is amicable the husband is willing to accommodate her wishes, but in exchange for a cash payment. By applying for a lifetime mortgage at the age of 65 the wife can raise up to 30% of the value of the home, i.e. £90,000. The property is transferred into her sole name and simultaneously the lifetime mortgage proceeds of £90,000 are paid over to the husband.
This leaves the husband with £90,000 cash which he can use as a deposit on a property for himself. Being 65 he can also raise a 30% lifetime mortgage on his new home and this enables him to buy a property for say £128,500 (i.e. cash £90,000=70% and lifetime mortgage 30%=£38,500).
Alternatively, if both parties in my example agreed to sell the matrimonial home and split the proceeds equally then prospects look brighter. With say £150,000 each as a deposit and with a 30% contribution from a lifetime mortgage, my divorced couple would each be looking to buy new homes in the region of £214,000. (These examples do not take fees into account but these would be roughly £1,800 for both parties, plus moving costs).
The husband and wife could have two options on the types of equity release schemes available. They could elect to make no further payments to make for life and opt for the roll-up lifetime mortgage which would see the balance increasing yearly.
Alternatively, they can apply to take out an interest only lifetime mortgage and repay the monthly interest which would render the lifetime mortgage balance the same throughout. This is ideal should they be considering leaving a fixed inheritance for their beneficiaries.
How is the equity release mortgage repaid?
Dependent on which type of lifetime mortgage is selected, the final balance is usually upon repayment of the loan and any accrued interest takes place on death, entry into residential care or earlier sale of the property.
And the option to avoid monthly interest payments could be very attractive to divorced ex-spouses on reduced pension incomes. This is maybe the reason why the roll-up equity release types are the most popular?
Equity release is increasingly being used to fund divorce settlements, either by the parties themselves or by concerned parents. If you find yourself in a similar situation in experiencing divorce in retirement and need financial advice on how to separate the matrimonial home then please contact Mike Vicary of Equity Release Supermarket on 0800 678 5159.
All discussions will be kept in strictest confidence and any initial consultation will be FREE of charge. I look forward to speaking with you.
m: 0800 678 5159