Client Scenario | Divorce in later life

While the overall divorce rate in Australia has hit a 50-year low, the 60+ demographic is the only age group where rates are consistently climbing. Divorcing after 60 may trigger a ‘wealth shock’ as couples must split a single pool of assets just as their earning potential peaks or disappears.

This creates a difficult catch-22: one partner may lack the employment income to qualify for a traditional mortgage to buy out the other, yet they also lack the liquid cash to downsize into a new home. Without the buffer of a 30-year career ahead of them, people in this position frequently find themselves asset-rich but cash-poor, making equity-based lending a critical lifeline.

This scenario is based on a real life situation, although names and places have been changed to protect client confidentiality.

Phillip (68) was going through a divorce. He was required to pay a financial settlement to his former partner and had accrued not insignificant legal fees associated with the divorce.

Phillip was required to pay a financial settlement of $140,000 to his former partner. His legal advice for the divorce had accumulated around $20,000 in fees and he wanted to discharge a small ($12,000) personal loan. His key priorities were simple: pay out his financial obligations, remain living in his home following the divorce and, ideally, not be burdened by monthly repayments.

Phillip’s broker recommended a reverse mortgage.

With a home valued at $780,000 and a 28% LVR, Phillip could access $218,400. He drew $185,000 to cover the divorce settlement, the legal fees and discharge his personal loan. This left him with $13,000 which he planned to set aside for unexpected expenses.

Using a reverse mortgage, Phiilip was able to clear his financial obligations and importantly, remain in his home without the need for regular repayments. This preserved his cash flow and provided him stability as he moved into the next stage of life.

Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable, and terms and conditions apply (available upon request). Household Capital Pty Limited ACN 618 068 214, Australian Credit Licence 545906, is the Servicer for the credit provider Household Capital Services Pty Limited ACN 625 860 764.