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Michelle is an award-winning chartered financial planner who holds the designation 'Fellow of the PFS' demonstrating her commitment to maintaining the highest standards of knowledge, ethical conduct, and professional practice. Michelle is also an accredited member of the Society of Later Life advisers. Michelle offers a fully personalised service tailored to each clients individual needs and goals, using an approach that was recognised and honoured by the Women in Financial Advice awards in 2021. Clients working with Michelle can expect a high level of professionalism, integrity and a lasting relationship built on trust and open communication
Michelle Boakes
Chartered Financial Planner
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What happens to your home during a divorce? Can I use equity release for a divorce settlement?
When a couple divorces, all the assets they hold between them will need to be divided up, including any property. You and your partner will need to reach an agreement to decide how the value of the property is divided – or a judge will decide for you if you can’t agree.
Once the division has been agreed, one party may want to stay in the property and buy out the other, especially if it’s been the family home. In that case, you can apply for a mortgage to raise the funds and buy out your ex-partner’s share. If you are aged over 55, then an equity release or a lifetime mortgage is something you can consider.
When might equity release be an option for divorcing couples? How can equity release help with a divorce settlement?
Equity release products might be an option for someone over the age of 55 who needs to buy out an ex-partner’s share in the property. It’s particularly helpful if that person has low or no income. Releasing equity in this way will provide a lump sum that can be paid to the ex-partner to retain the home.
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Can you do equity release if you are under 55? Do both partners have to be over 55 for equity release?
There aren’t any equity release or lifetime mortgages available to people under the age of 55 at the moment [podcast recorded March 2024]. Any party that will be on the equity release mortgage will need to be over the minimum age limit for that provider. If it’s a lifetime mortgage, the age requirement is likely to be 55 plus.
But if you are divorcing and the person leaving the property is aged under 55, but the applicant of the equity release mortgage is over 55, that should be fine.
What happens if a couple with a joint mortgage split up?
When a couple separates and they have a joint mortgage, the mortgage could be cleared by selling the property, or by one partner remortgaging to another lender. The current lender may agree to one party taking over the existing mortgage.
That’s usually based on an affordability assessment, unless it’s already a lifetime mortgage, in which case it’s subject to the terms and conditions of your existing lender.
Is there a better alternative to equity release during a divorce?
There are a few options to release cash from the value of your house to buy out an ex-partner’s share.
Every option has advantages and disadvantages. Certain options will probably be more suitable for you based on your individual circumstances. A suitably qualified advisor will be able to help you determine which approach works best for you.
So it’s really difficult to say whether there are better options. It really just depends on the specific circumstances.
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Do I need a solicitor to buy out my partner?
A solicitor will make sure that the necessary legal procedures are carried out correctly. They ensure that the other party is removed from the property deeds and transfer them to the sole name.
Most lenders in the UK would request that a solicitor is involved in that, and may even insist on the outgoing party having legal representation as well.
What are the benefits and risks of using equity release during divorce?
There are so many, I probably won’t be able to cover all of them. It depends on the individual circumstances, but equity release can be beneficial for couples over the age of 55 who have decided to divorce, particularly if they need to release cash from the property to settle their financial agreement.
It can help someone remain in the family home or buy a new property if their divorce settlement doesn’t provide enough money to buy a new home outright.
A lifetime mortgage can be particularly beneficial if someone has little to no income, as there is no affordability assessment unlike a traditional mortgage.
But there are disadvantages and they’re, again, dependent on individual circumstances. Primary ones that spring to mind are that the value of your estate will be reduced if your interest is rolling up. That will mean less money will be passed on to your beneficiaries when you pass away.
The interest rate on a lifetime mortgage can also be higher than a traditional mortgage. There may be higher fees to arrange the borrowing and there might be exit penalties. You may not be able to take it with you to a new property. So there are a number of pros and cons and all of those should be considered before you enter into an agreement.
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How can an equity release adviser help in these circumstances?
An adviser will help you to consider the pros and cons of an arrangement. We can help you look at alternative options so that you can weigh up all of the information before making a decision.
Then, once you’ve decided which product is the right way forward for you, we can help you find the right lender for your circumstances. We will review different lenders to see what fits, find the most suitable product for you and help you to keep your costs as low as possible.
Divorce planning/settlements are not regulated by the Financial Conduct Authority.
Equity Release & Lifetime Mortgages will reduce the value of your estate and can affect your eligibility for means tested benefits.
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ESTATE PLANNING IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
