Using Equity Release to Buy Out Your partner (Settlement Guide for 2023)
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Author Paul Murphy
Updated January 2023
Can You Use Equity Release in divorce and for settlement?
Divorce can be one of the most stressful events in your life.
We explore the key financial considerations for couples parting ways and what options may help make the process less stressful.
Equity release can be used to buy out one partner in a jointly owned home.
For the process to work, you must agree a settlement figure, whilst the partner being bought out must agree to have their name removed from the title deeds as the agreement involves being ‘bought out’ of their share of the home.
The person ‘buying out’ the other partner will be the named owner on the equity release, which means the home will be in the sole name of the remaining homeowner once the process is complete.
Savings, Assets and debt
Any savings, investments, assets or pension pots built up during your marriage will form part of your joint assets. It’s important to remember that either partner may have a claim on these.
Do I need to divorce with equity release?
If the prospect of divorce is too much, or too expensive, an alternative option is a legal deed of separation. Most equity release companies will accept this in place of a divorce.
This is a simpler process when an amicable agreement can be reached and can save money on protracted legal costs.
Any Assets earned during your marriage belong to both of you. This includes your home.
However, If you inherited a property prior to getting married, this may not be considered a matrimonial asset and it may be treated differently for the purposes of divorce.
If you bought your home whilst you were married, this is a joint asset and this applies even if only one of your names is on the deeds.
Divorcing couples might sell a joint home and split the proceeds. Or one could buy out the other’s equity now or in the future. Or joint money could be used to buy a second property while keeping the existing house.
Can You Use Equity Release for Gifting?
Watch this space, this article is due shortly
What Happens When Your Interest-Only Mortgage Ends?
When your mortgage term is ending, your current mortgage lender will require a repayment plan. Assuming there are no repayment methods available, firstly, they will discuss the option of converting your lending to a repayment mortgage, however this option can prove expensive compared with interest mortgage payments.
Secondly, mortgage lenders will ask you whether you have considered downsizing, and thirdly they may suggest considering a later life mortgage, such as a lifetime mortgage.