Equity Release Schemes and Divorce: Get the Right Advice!
There is an increasing trend of people in their later life in that more couples are deciding to divorce, and equity release may provide a solution to the potential financial issues which are associated with separating.
The New Divorce Trend
It appears that many people having lived together but enjoyed separate lives for years find retirement a catalyst for making changes in their relationship. Many experts theorise that it is the thought of the increasing amounts of social time which couples may find themselves sharing on retirement which prompts the decision to divorce. Statistics have shown that the numbers of people choosing to divorce once their children have grown up and they are retiring are on the increase. While this may be the best option it can cause major problems when dividing assets when you are approaching a stage in your life with a fixed income.
The Difficulties of Dividing Assets in Retirement
While people may have carefully planned for their comfortable retirement, this was likely as a couple and it may present a problem to manage as a single person with only half the assets. In many cases the marital home can be a large issue as it is generally the largest asset yet provides security and stability to the occupant. While pensions and other assets can be negotiated and divided, the marital home can present a real difficulty.
Divorce and Equity Release
In these sorts of scenarios many people consider divorce and equity release to relieve the situation. The person who chooses to retain the marital home can use equity release to obtain capital through a lifetime mortgage, home reversion plan or other scheme. Generally, the person retaining the home would not qualify for a conventional mortgage due to their age or because of a lack of income. However, equity release allows the other spouse to receive their share of the value of the property, without the need for repayments.
In cases of divorce and equity release, the lump sum could be used to contribute as a partial or full payment against the percentage split awarded to the other party. Generally a fifty/ fifty split can be accomplished depending on the age of the parties involved. The size of equity release sum would be based on calculations including the age of the youngest spouse and possibly the health of the spouse retaining the property.
For example, the maximum release provided with a roll up lifetime mortgage at age sixty would only be 26%. This percentage increases to 31% at age sixty-five. However, at age sixty-five a home reversion plan could be considered. As the age of the remaining spouse increases, the percentage of equity release also increases to provide a maximum of 46% for a lifetime mortgage and 56% for home reversion at aged eighty.
If there are circumstances of health issues, some providers may increase the amount of release under home reversions to 56% which can provide a more favourable sum based on impaired life facility. This type of arrangement could in combination with negotiation of existing assets allow one spouse to retain the marital home and not need to move. In this way the negotiations for divorce and equity release can minimise the stress of this potentially emotionally upsetting episode.
If you are considering divorce and equity release seems like the best possible option for you, it is vital that you consult professional financial and legal advice. There are a number of considerations including the timing of the equity release to ensure it is correctly processed in one name only. Professional advice will be able to allow you to proceed with confidence that it is the correct option for your circumstances.