Can a Reverse Mortgage Save My Divorce?

by | Apr 22, 2019

While divorce is now considered a relatively normal outcome for many marriages, the increase in divorce among baby boomers has more than doubled in recent years. It even has it’s own name now. Gray Divorce. For those facing gray divorce, the stakes can seem very high. A young couple in a short term marriage may have few assets and not much to separate, but a couple in a long term marriage usually has a home, retirement assets and often other accumulated property to consider.

Gray Divorce Realities

An older couple has had the time to plan their future, save up over the years and work towards a comfortable life in retirement. But those plans usually center around supporting one household and start to look a lot flimsier when it must stretch to support two separate households.

So what are the options for baby boomers facing divorce? Especially when you feel like there just is not enough of a cushion for you to live separately. Well, if you are over 62, and you have more than 50% equity in your home and especially if you are already retired, considering a reverse mortgage may make the choice to live separately possible.

In the past, reverse mortgages earned such a bad reputation that many people still will not touch them with a ten-foot pole. After the 2008 great recession, they garnered tighter regulations that have made them a more viable option for those reaching retirement.

How the Reverse Mortgage Option Worked

We’ve had a couple that was very amicable but certain that they wanted to divorce, come to us for help in finding a way forward. The issue for the wife, was that after splitting the value of the home, it was not quite enough to fully purchase the new home she wanted, and in addition, she did not have the income and assets that would allow her to  pay a mortgage. They found their answer in a reverse purchase, where she put her amount from the sale of the marital home towards the purchase she wanted, and rolled the balance into a reverse mortgage as opposed to carrying a forward mortgage on the home.

Thereverse mortgage option allowed them to move forward with their divorce plans without leaving one of them with the short end of the stick. While it may not be the answer for everyone, it is definitely worth considering when facing a change like gray divorce.

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