Silver splitters: How a lifetime mortgage could help you separate in later life

Divorce in later life is on the up. Although (until last year) the overall divorce rate has been falling, for the last 20 years, there’s been a steady increase in separation among the over 60s, according to the Office of National Statistics. Whatever the reason – whether it’s down to the ageing population, less stigma around divorce, or the fact that more women are in work and financially independent – there’s a rising tide of “silver splitters”.

Divorce brings challenges whatever your age. But separating when you’re older and have been together for a long time, brings a unique set of difficulties. Splitting assets that you have spent decades accumulating can be intricate and complex. It can also be very hard to leave a house that you’ve called home for many years, with all the memories it holds. On top of that, if you’re both retired you may not have ready access to the money you need to go through a divorce.  A pension may have been enough to cover the cost of one household, but can it stretch to supporting two?

If you are 55 or over, and own a property worth at least £70,000, a lifetime mortgage might be the answer.

What is a lifetime mortgage?

If you have been paying into your property for most of your life, it’s likely to be your biggest asset. But how do you access this wealth? Selling the house is not the only answer. A lifetime mortgage is a long-term loan that is secured against your home. It allows you to release some of the value of your house, so you can use the money now.

Freeing up these funds could help you pay for new housing for one of you, while the other stays in the family home. This way you don’t have to say goodbye to it, and your children and grandchildren won’t either.

What are the plus points of a lifetime mortgage?

The lump sum of money you unlock from your house is tax-free and you will still own 100% of the property.

Unlike most mortgages, you don’t have to make any monthly repayments. (When you die or move into long-term care, the home is sold and money from the sale is used to pay off the loan.)

Perhaps most importantly, no matter how much money you choose to free up, you are never able to borrow more than your house is worth. This means you won’t pass any debt on to your children.

Are there any downsides I need to think about?

It’s important to remember that interest is charged on the money you take out and that you’re reducing the value of your home – by the loan amount, plus any interest – to be inherited by your children.

A lifetime mortgage may also affect whether you can get state benefits.

For more information about lifetime mortgages contact The Financial Planning Group.

For advice on how to separate amicably in later life, with a fair financial split, please contact us to book a free 15-minute consultation.