It’s estimated that 42% of marriages in England and Wales will end in divorce. It’s normal in divorce to feel a wide range of emotions and uncertainty. 
Potentially more serious is the financial repercussions of divorce. A Lifetime Mortgage (often termed “equity release”) provides a way for couples to free up capital from the property's value and move on independently. 

Considering a Lifetime Mortgage after divorce 

Divorce generally means someone is moving out of the marital home. They will need funds to purchase or rent a property, a divorce, and gain financial stability. 

A Lifetime Mortgage can provide a much-needed financial boost during a divorce settlement by offering a tax-free lump sum. This gives one party access to the funds from your property, allowing the other to stay in the home. You won’t need to repay the loan until you die. On your death, the lender takes your home and reclaims their money.  The amount you can borrow is based on the valuation of your property and your age.  If you are in impaired health, you may be able to borrow more.

The other option is to take a Retirement Interest Only mortgage or standard mortgage.  You would be required to make monthly payments on this mortgage (either interest or repayment, depending on the product chosen) and your income and outgoings would be tested for affordability.

Financial benefits of a Lifetime Mortgage after divorce 

A Lifetime Mortgage after divorce means you still have a roof over your head. It gives you the funds you need to buy out your partner, allowing them to plan their future. To benefit from equity release you need to be over 55 and own your property. 
A divorce settlement with equity release can also help you consolidate loans and make your finances more manageable. 

Potential drawbacks of a Lifetime Mortgage after divorce 

Less inheritance
A Lifetime Mortgage means that the lender will want to be repaid on your death or if you enter long term care, and will therefore take their money from your home. That means the home will need to be sold, reducing what’s available for your children. You may want to look at insurance policies and trusts to provide for your children.

Future care
If you have funds in the bank you may be entitled to fewer benefits. You may even have to pay for your healthcare, which can be expensive. The equity left may not cover this. 

The Lifetime Mortgage process after divorce

A Lifetime Mortgage is a solution but isn’t the right solution for everyone. Legally, you need to get advice from a qualified advisor before you proceed. However, before you do that, you need to speak to your divorce solicitor and confirm that a Lifetime Mortgage is part of the divorce settlement agreement. They will ensure that you understand the pitfalls and benefits of a Lifetime Mortgage in your divorce settlement. 

A professional advisor can give you personalised guidance through the process, help you see what deals are being offered by equity release providers, and ensure you understand the long-term implications 

Alternatives to a Lifetime Mortgage after divorce 

A Lifetime Mortgage isn’t the only option. If you’ve been thinking about downsizing then a property valuation may show that this is a good time to sell the marital home and downsize. This approach is also good if you’re thinking about moving or even going travelling. 

Another viable option is remortgaging. You may be able to take out a new mortgage, allowing you to pay off your ex-partner and continue living in the property. Of course, you’ll need to pay the mortgage every month and must plan your finances accordingly. 

Important considerations before taking out a Lifetime Mortgage 

Your professional advisor can help you with the following!

•  Property valuation – to establish how much you have to pay your ex-partner and the available equity
• Current or likely future health conditions – these may affect life expectancy and disqualify you from certain products
• Type of repayment, repaying nothing will dramatically increase what the lender can collect on your death and reduce what your children will get
• Make sure your Lifetime Mortgage provider is registered with the Equity Release Council
• Check what, if any, means-tested benefits you’ll potentially lose out on 

It’s essential that you get professional advice before making this decision. 

Conclusion 

A Lifetime Mortgage is a viable option in many scenarios, especially when handling a divorce and if you’re not ready to move on from the family home. However, there are different products and pitfalls you need to be aware of. Before you sign, seek professional advice, we’re here and happy to help. 

A Lifetime Mortgage after divorce FAQS 

1.    Can I undertake a Lifetime Mortgage if we’re not married?
Yes, the process of a Lifetime Mortgage for separated couples is the same as for married couples. However, instead of a decree absolute or a consent order, you’ll need an official separation document from your lawyer, signed by both parties. It is worth taking professional advice, especially if the property is in one name and not two. 

2.    How does a Lifetime Mortgage help me buy a new home?
When there are children involved it’s common for both parents to want the children to continue living in the marital home. However, this will mean one party has to move out, potentially without the financial means to buy and renting can feel like a large drain on your expenses. Equity release allows one partner to stay in the house with the children while giving a lump sum to the other partner. This allows them to get a deposit and a place of their own for the children to stay when they visit. 

3.    Can I get a Lifetime Mortgage to fund the divorce?
You can, but this is not normally the best option. The average divorce costs are £2,000; a Lifetime Mortgage usually releases significantly more than this. A better option may be to take out a secured loan or even a home equity loan. You may even be eligible for government funding to help with divorce costs, provided you’re on a low income.