By John Luddy, Norcom’s Senior Vice President of Reverse Mortgage Lending
While news of “grey divorces” are shocking, divorces occurring over the age of 50 have been on the rise since the 1990s according to Pew Research Center – and as with any marital separation, the division of assets can be a daunting task. For couples that have spent over 20 years together and of retirement age, though, their situation is unique and protecting their finances and investments are at the forefront of these conversations.
Reverse mortgages, which are available for borrowers over 62 years old, can help facilitate “grey divorce” procedures. By utilizing this type of mortgage, a home’s equity is converted into cash that can be received as a lump sum, in monthly installments or as a credit line, and isn’t paid back until the home is sold, the borrower permanently moves away or is deceased. This provides couples with flexibility to address common financial concerns brought about by the divorce such as:
- How can a spouse get their share of the home’s equity?
- Do I have enough money for retirement and healthcare needs?
- How can I pay a mortgage on a fixed-income?
- How can I supplement my income after my alimony ends?
- Can I afford a new house when the divorce is final?
- How will this impact my estate?
For a “grey divorce” couple, reverse mortgages are mostly commonly used to refinance the house under one spouse’s name, as they want to stay in the home. They are then able to give the other spouse their share of the home’s equity without withdrawing from a 401k or using other retirement funds.
Since there are no monthly payments or stipulations on how funds are used with this loan, a reverse mortgage can also provide a “grey divorcee” with financial stability allowing them to address other expenses or supplement their income without worrying about losing their home.
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Another benefit of a reverse mortgage is that unlike other loans it allows the borrower to purchase a home without having established credit. This is especially helpful if someone was financially dependent on the other spouse.
While child custody isn’t typically a part of “grey divorce” discussions, ensuring your estate isn’t impacted by the divorce and will remain intact for your adult children maybe. A reverse mortgage can help borrowers maximize their estate for their heirs by continuing to enjoy the home’s appreciated value, and protect them from having to pay out of pocket expenses if the home’s value depreciates.
For more information about how a Reverse Mortgage could work for you, please visit www.NorcomMortgage.com or contact a Norcom Mortgage Loan Originator.