Using Equity Release and for a Divorce Settlement

The relationship between equity release and divorce is multi-layered. On one hand, there is the complicated process of trying to organise your equity release plan while you are going through a divorce.

On the other hand, equity release can be pursued as a direct result of a couple wanting to divorce. This is because it can help one or both members of the couple to fund the divorce, and to have a stable living situation in their single life.

Today, we’re going to dive into the relationship between equity release and divorce for our customers who are currently struggling to navigate tricky financial situations.

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Do You Have to Be Married to Take Out Equity?

No, you do not have to be married to take out equity. Most equity release consumers are married, but this is simply because most over-55s are married. You could release equity as a single person or as someone in a long-term relationship who is not married.

If you decide to release equity as an individual, please remember that if you do end up marrying someone, they would not automatically be enrolled onto your equity release plan.

This means they would be expected to vacate your home after you pass away, and this could have a significantly negative impact on their finances. If you want to avoid this, you would have to ask your equity release lender if you could add your partner to your plan.

The same applies if you make an individual application while you are married, so we often recommend making a joint application, especially if you have joint ownership of your home.

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How Common is Divorce in Later Life?

Between 2005-2015, there was a 23% increase in the number of men over the age of 65 getting a divorce, and a 38% increase among women of the same age (1).

As equity release is available for people aged 55 and over, it goes without saying that many people who take out equity will have either divorced prior to pursuing the scheme, or will end up getting a divorce while they are on the scheme.

Having said that, people of equity release age are not the most likely age group to divorce. As of 2019, only 0.7% of marriages of people aged between 55-59 in the UK ended in divorce. This rose by 0.2% since 1993. As for people aged 60 and over, the figure was 0.1% in 1993 and 0.2% in 2019 (2).

In terms of the amount of equity release consumers that are divorced, the figure is one in ten (3).

In other words, most of our equity release customers will not have to concern themselves with the relationship between equity release and divorce too much. However, we hope this article is helpful for the one in ten who do.

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What Happens If I Get a Divorce After Releasing Equity?

If you get a divorce after taking out equity with your partner, one of you could be removed from the equity release plan.

The remaining homeowner could add a future partner to the plan, provided that this person was at least 55 years old when the plan was taken out.

However, if you filed an individual equity release application, the process would be much easier as you would keep your equity release plan without having to change it.

It wouldn’t matter that your income would decrease, as you could rely on your equity funds.

Of course, some of these funds would go to your partner. However, remember that you could access a very large loan if your property is valuable enough, so this would be sufficient to fund both yours and your partner’s retirement, particularly if you can also rely on pensions, savings, and benefits.

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Seek Advice For Divorcing After Releasing Equity

If you’re concerned about how divorcing after releasing equity works, please get in touch with us and explain your situation. We will tell you how you can go about informing your lender of the change in situation.

We also recommend that you speak to a solicitor about how this would work legally. You could use the solicitor you met with when you first took out equity if you had a good experience with them.

Whatever you do, make sure any adviser you see is an expert in equity release and not just a general adviser. The best thing to do is find an adviser who is approved by the Equity Release Council (ERC), as they will have to follow certain regulations that keep you safe during the equity release process.

Please call our 24-Hour Helpline: 0330 058 1579

Can I Use Equity Release to Make the Divorce Process Easier?

Yes, if you are getting a divorce, you could take out a lifetime mortgage as a way to continue living in your own property. This is an ideal situation for anyone who would not ordinarily be able to afford to live in their current home on their own.

In this situation, you would make the most of the initial low interest on a lifetime mortgage, as well as the fact that the debt does not have to be repaid.

It goes without saying that both you and your partner would have to agree on this decision in order for you to be able to go ahead with equity release.

You usually have to provide a deed of separation to your chosen equity release provider as proof that you both agree on what you want to do with your property after divorce.

It is often a wise financial decision to use a lifetime mortgage to aid your divorce as house prices are likely to have risen since you took out your conventional mortgage.

This means you could release a huge amount of money from your property that you could both benefit from, without having to move home.

This is an even more appealing option if you are in your 70s or 80s, as the older you are, the more money you could unlock from your property. However, we would still encourage people in their late 50s and 60s to at least look into this option.

The great news is that you can get an idea of how much money you could release very quickly, using our free equity release calculator. Simply select your property type, property value, and your age, and you will get a figure of how high your loan could be.

You can also request a personalised quote from us if you are serious about considering equity release as a way to facilitate the divorce process.

Please call our 24-Hour Helpline: 0330 058 1579

Pros Of Using Equity Release Products After Divorcing

Firstly, if you use equity release products to make your divorce easier, you would be able to keep your current property.

This is very important for some people, who may have put lots of money into renovating their home, they may live near to their family, or they may simply not feel able to move home in their later life.

What’s more, selling your home can take a very long time, particularly with the poor condition of the property market at the minute. On the other hand, taking out a lifetime mortgage would only take up to two months, so some people choose to do this as a way to save time.

The partner who does not keep the house would be able to put their share of the equity loan towards purchasing a new home for themselves, leaving everyone in a comfortable position.

Some people believe it is best to stay in their current property as they have grandchildren that they look after regularly. In this situation, their partner is likely to agree that they should do all they can to stay in the house and keep the family situation as stable as possible.

Please call our 24-Hour Helpline: 0330 058 1579

Cons Of Using Equity Release Products After Divorcing

Firstly, it costs money to take out a lifetime mortgage. Though the fees tend to be well under £3000, this is a lot of money to some people, so it may not be a viable option.

These fees are not avoidable, as they are essential to the equity release process. Some common costs include: valuation fees, administration fees, legal fees, and application fees.

Secondly, when you release equity, you are reducing the amount of funds you can leave to your loved ones.

Some couples are not happy to do this, as they want to make sure their children and grandchildren are in a secure financial position. Though they can reserve some funds for their family, the amount will be lower than if they did not take out a lifetime mortgage.

Finally, releasing equity can take away your entitlement to benefits. Some people are reliant on their benefits to help fund their retirement, and this becomes all the more important when they divorce and have to start living off one income.

For this reason, they may decide to find another way to fund their divorce and their post-divorce life.

Please call our 24-Hour Helpline: 0330 058 1579

Seek Advice For Using Equity Release Products After Divorcing

We offer free consultations in which we explain how equity release works and how it affects people in certain situations, such as people who want to use equity release to help with their divorce, or people who are getting a divorce after taking out equity.

To access this consultation, you can either fill out your details here or call us on 0330 058 1579. If you need urgent advice, we would recommend calling us as soon as you can.

We are open from 8am-8pm every day of the week, so you do not have to squeeze the call into your 9-5.

If you can wait, why not take this time to research equity release thoroughly? Have a look at our frequently asked questions about equity release, our list of equity release plans, and our blog posts on various aspects of this scheme.

We encourage you to not be misled by reductive stereotypes of equity release. Some of these are based on truth, as you will see in our article on the disadvantages of equity release.

However, others do not acknowledge how much equity has changed for the better in recent years.

Nowadays, equity release is a very safe scheme that can change the lives of people who pursue it.

People who have never had a large disposable income are able to afford new cars, family holidays, and even second homes.

People who were heading towards poverty can put their entire loan towards paying their bills and paying off debts.

As well as meeting with an adviser from Equity Release Warehouse, we also encourage you to speak to a financial adviser and a solicitor about your decision.

If you make an application to an equity release lender, you will be expected to have at least one face-to-face meeting with a solicitor, so why not start this process now and gain more knowledge before you start on the scheme?

Please call our 24-Hour Helpline: 0330 058 1579

References

[1] Marriage and divorce on the rise at 65 and over https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/marriagecohabitationandcivilpartnerships/articles/marriageanddivorceontheriseat65andover/2017-07-18

[2] Divorce Statistics UK 2021 https://www.nimblefins.co.uk/divorce-statistics-uk

[3] One in ten equity release customers are divorced over-60s using it to help with asset-splitting process https://www.thisismoney.co.uk/money/pensions/article-2416733/Divorcing-60s-turn-equity-release-assist-asset-splitting-process.html