Divorce and bridging: a match made in heaven?

Divorce and bridging: a match made in heaven?



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The recession has bitten many of us and there are countless stories of businesses going bust, mortgages defaulting and bailiffs galore.

Not so, however, for the institute of marriage. It seems that recession means a drop in divorce rates when we are hard up, as people are unable to afford it.

It’s easy to imagine; bills coming out of your ears, debts mounting, kids screaming – it could all become too much.

So much that you can’t stand to be there anymore and want to leave, but can’t, because you can’t move out until you sell the house, and selling the house will just take too long.

It’s a problem. But is it a problem that short term lenders could possibly find a solution for?

The Office for National Statistics released figures earlier this year showing the numbers for divorce in the UK are at their lowest since 1974, with a big dip in the past four to five years.

This could be attributed to many things, but the most evident is the massive economic crisis we have just experienced – and are still experiencing. Marriages suffer at stressful times and divorce can be an expensive option. The average cost for divorce is close to £13000 and could possibly rise to £50000 in some cases.

Illicit Encounters, an online dating company that specialises in extra marital affairs, recently conducted a poll of its members, finding out what was driving them to pursue an affair. A staggering 31,000 of 78,000 members said they were looking for an extra marital partner because they were unhappy in their marriages but were put off divorce because of the cost.

38 per cent of members felt that the stress of selling their home in the current climate was too much to bear, while 42 per cent were put off by the actual cost of divorce.

Rosie Freeman-Jones, of Illicit Encounters, spoke to media: “We've seen a dramatic rise in membership in London as the recession has forced people to stay in marriages they would rather get out of.”

It could be that short term lenders may be able to help some unhappy couples out of situations such as these. Paul Brett, Business Development Director at the short term asset finance specialist borro, feels there could be a case for the use of services like theirs: “Raising cash quickly is what borro is all about.

“For anyone who has personal assets of value, such as jewellery, luxury watches, fine art, antiques, luxury cars, yachts and more, can use them as security against a short term loan from borro. We can lend up to 70% of the open market value that our expert valuation team put on the goods in question.”

However, Mr Brett goes on to highlight that there would probably need to be cooperation between the couple: “Assuming there is no problem in terms of proof of ownership (within the marriage), then once the goods have been valued and an offer made and accepted, money can be in the person’s account on the same day.

“The loan can be redeemed at any time and there are no credit checks, extension, redemption, expiry or penalty fees for customers,” he said.

Paul Aitken, CEO at Borro Ltd., confirmed they had given out loans to clients going through divorce but he did not feel it was a situation they would openly market to, as the flow of business coming from that direction was very organic.

There is also bridging finance to consider, and whether this could possibly provide the money needed for somebody seeking a divorce to find a new property.

Alan Margolis, Head of Bridging at United Trust Bank, said: “We have had cases to do with divorce in the past but these have been lending to divorcees.

“We recently had a gentleman who was living in the ex-marital home but the memories were too painful for him and he wanted to get out of the property as quickly as possible. In that case we could bridge between him finding a new home and selling the one he had previously shared with his wife.”

However, he was sceptical as to whether bridging finance for people seeking divorce would work:

“In theory, bridging finance could help but it would be reliant on certain factors. There would need to be sufficient equity in the property, as a bridging lender would rarely provide a loan with an LTV greater than 70 per cent.

“The reality is that the average couple in London will have a mortgage on their home - say something like 50 per cent – and would not have sufficient equity on the remainder to afford somewhere very desirable even if they did secure the loan. That scenario doesn’t factor in any children from the marriage, which would further restrict a person’s options,” he said.

“Unless the people concerned were fortunate enough to be high earners, bridging finance would just not be viable in a situation like this.”

Bridging finance is also used when divorce proceedings are already underway and can provide a quick option for a settlement.

Jonathan Newman, Senior Partner at Brightstone Law LLP, has experience of bridging being used as part of divorce proceedings: “I wouldn’t say you see it often, but it is a route to which finance can be raised to settle liability under a divorce settlement.

“So a husband or wife might want to raise money to engineer a clean break situation – it is an expensive way of doing it, but it is a short circuit way.

“People have raised money against the property to facilitate a transfer of the matrimonial home. It would be part of the arrangement and the bridging loan would be taken out at the same time the property was transferred,” he said.

So, bridging is used when it comes to divorce but it tends to be only in the midst of divorce proceedings and can be used as part of a settlement.

Otherwise, unless they are earning big, a bridging loan may be out of reach to unhappy couples but short term lending on non-property assets looks like a possible option.

Whether people are even aware that short term lending is a possibility is another question. One thing is for sure, there won’t be any marketing directed at this certain demographic – that will be left to Illicit Encounters.

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