04 June 2019

Lifetime mortgages: a solution for ‘silver separators’?

Divorce is declining within younger age groups, but ONS figures show it is a growing trend among the over 60s.

For some, divorce can represent a new start. However, for many others it will be an emotional transition that can have a negative effect on the couple's finances.

What are the problems facing ‘silver separators’?

In over half of divorce cases, one of the partners will want to stay in the family home. This could mean selling up, and splitting the equity to buy two smaller properties isn’t always the best option. As well as the emotional and financial difficulties of moving, silver separators are faced with fierce competition from first time buyers. Sought-after smaller homes can become less affordable as competition is steep.

Retirement is also becoming increasingly expensive. With low interest rates, it’s even more difficult to generate an income from a portfolio of bonds or equities. Coupled with increasing life expectancy, pension pots and other savings now have to stretch further. Adding divorce into the mix can significantly impact people's retirement planning.

And then there are pensions. A pension may have been enough to support one household comfortably. But, when split across two, it may not be enough. Some divorcees may have fought to stay in the family home, only to find that this leaves them with a valuable physical asset – the property – but insufficient income to live on.

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How a lifetime mortgage could help

A lifetime mortgage can provide additional income at an expensive time. Your client could release money from their home in a lump sum to help cover costs such as legal fees.

The money released could enable one partner to effectively ‘buy out’ the other. This would allow your clients to separate without selling the family home. This could avoid some of the emotional stress and upheaval of moving.

It could even help your clients with a pension sharing order dispute. If one person wishes to keep their final salary pension as part of a divorce settlement, a lifetime mortgage can provide an alternative way of releasing a lump sum from their property to settle instead.

Read our case study on using a lifetime mortgage to support a later life divorce.

 

Good advice makes all the difference

Good advice early on in the divorce proceedings can make a real difference to your clients. There are many situations where a lifetime mortgage could be a viable solution and help avoid some of the financial and emotional stress of a divorce.

It’s important to remember that a lifetime mortgage creates a debt on the home, and if your client has more affordable ways of borrowing available, these should be considered first.

Interest is charged on the total loan amount plus any interest already added and the amount owed grows quickly and reduces the equity left in the property.

A lifetime mortgage will reduce any inheritance and may affect entitlement to State Benefits.

Find out more about our lifetime mortgages, and how they could help your clients through a later life divorce.

PDF file: Advising the silver separators PDF size: 66KB