According to the Office for National Statistics, divorce rates in England and Wales were higher in 2013 when compared with 2003 for men and women aged 50 and over, commonly referred to as “silver splitters”.
Last month my colleague wrote about the rising trend of ‘silver nups’ and how they can be used successfully to ring fence pre-existing assets.
It seems that lenders are finally recognising the statistics and are considering bringing a new product to market before 2017 called a ‘divorce mortgage’ which enables one party to stay put in the family home to avoid the trauma of moving.
The idea behind the product is that it will allow one spouse to borrow enough money for a set period of time to buy out their ex-partners’ share in the property.
What is not clear at this stage is the lending criteria – on the surface it appears to cater for divorcing couples of all ages and the length of term spouses will have to repay the amount borrowed is unclear – will it vary on individual circumstances or will it be a set term and what level of interest will be charged?
Selling or Staying in the Matrimonial Home?
According to the Nationwide, around 30% of divorcing couples sell the matrimonial home because either party cannot afford to continue to pay the mortgage and outgoings on their own. This usually comes down to the fact that the mortgage was granted on the basis of two incomes, which means lenders often want the spouse wishing to stay in the home to make a capital contribution to increase the original deposit to around 25% of the value.
Some lenders will take into account child maintenance, benefits, tax credits and spousal maintenance in addition to earned income when assessing a spouse’s mortgage capacity going forward, but many do not. The result of the stricter affordability checks introduced by lenders two years ago has made re-mortgaging even more difficult, but not impossible, for divorcing couples.
Selling the family home can be difficult for many especially where there are young children, as parents often want to retain as much stability as possible during divorce. However for some selling the family home is welcome and represents a fresh start.
A divorce mortgage may be helpful to a spouse with a decent income (but a lack of capital) who can afford the mortgage repayments but it may be of little assistance to a spouse with a more modest income.
It remains to be seen whether the divorce mortgage will become a silver bullet to cure the upset and disruption of having to sell the family home, or whether the practicalities of trying to divide one pot of money into two will still see spouses selling up for years to come.
About the Author
As an Associate Solicitor at Gorvins Solicitors‘ Family and Matrimonial department Linzi Perriman regularly advises clients in relation to divorce, financial and property disputes, adopting a constructive and conciliatory approach consistent with Resolution’s Code of Conduct.
Linzi also assists litigants in person via the Resolution free legal advice clinic at Manchester Family Court and mentors students studying the LPC at the University of Law.