An increasing phenomenon in later life is the number of couples who are now deciding to divorce.
Often having lived together but had separate lives for many years, retirement then can seem the final straw in their relationship. Perhaps the knowledge of the impending hours of greater social time together once retirement arises is the most common reason!
Nevertheless, statistics show increasing numbers are deciding to end their marriages in retirement and move on, once their children have left home. This works well for many people, but one of the major problems of divorce in retirement is dividing assets when you are approaching or have reached the end of your earning power.
Someone who was set for a comfortable retirement as part of a couple may well be struggling as a single person on half the assets. The marital home is often a bone of contention because it is usually the most valuable asset and often represents stability and security to the occupants.
However, pensions can also create many issues & this will be discussed in a separate article including pension sharing on divorce with offsetting & earmarking being the methods of distribution.
With reference to the marital home, equity release can often help in these situations. The person who remains in the marital home can release cash from the value of the property either by a lifetime mortgage or a home reversion plan to ensure that the spouse receives their share of the property.
In most cases, it would not be possible for the person living in the marital home to take out a conventional mortgage because they may not have enough income to support it. However, by taking out a lifetime mortgage or a home reversion plan, they know they can stay in their home for life without having to make repayments during their lifetime.
‘A house is not a home’ may be easy to understand in normal circumstances but in the context of divorce, particularly from a woman’s point of view, a home is where you nurture and provide for those you love and care for and where you feel secure. Divorce is a traumatic time when normal life is disrupted. If it’s possible to maintain some security by doing a lifetime mortgage or home reversion plan to keep your home, many would take that option.
So How Can Equity Release Assist?
Well depending on the percentage split to each party, whether it is 50/50 or similar proportion, equity release could contribute either partial or in full towards the settlement. However this would be dependent on age. The size of the equity release is calculated based on the age of the youngest party & in some circumstances the health of the remaining party.
For example at age 60 the maximum release could only be provided by a roll-up lifetime mortgage & the percentage currently is only 26%. Nevertheless at age 65 a lifetime mortgage can release 31%, however a reversion scheme can also now be considered. As age increases, so do the percentages, to the extent that at age 80 one can release a maximum of 46% on a lifetime mortgage & 56% on a reversion scheme.
In circumstances of ill health, some lenders will even increase the home reversions 56% giving a more favourable lump sum based on an impaired life facility. Therefore, via a combination of negotiation of existing assets & the application of equity release could result in the remaining party not having to move or downsize at a distressing time.
This enables stability throughout the remainder of their retirement..or until a new partner is found!
For further information on raising equity on divorce call 0800 678 5159.