By Mathew Allen MLO-254296
While divorce rates across the nation are in decline, the divorce rate for seniors is skyrocketing. In fact, from 1990 to 2009, divorce rates for couples over 50 have doubled. Researchers dubbed this phenomenon as “Gray Divorce.” Getting a divorce during retirement brings some unique financial problems due to fixed incomes, division of assets, alimony and dealing with the family home. Here are some situations where a reverse mortgage may provide an excellent solution.
Paying the Ex-Spouse their Portion of Equity – This scenario really works best when the home is owned free and clear or there is only a small balance left on the mortgage. With a reverse mortgage, the biggest determining factor on how much can be borrowed is age. If you are 62, you could borrow roughly 52% of the home’s value. If you are 80, you can borrow roughly 66% of the home’s value.
There are four reasons why you may want to consider utilizing a reverse mortgage in this situation. The first reason is might be able to retain the home. The second reason would be you might be able to retain more of the “liquid” assets such as stocks, bonds and savings versus giving up some or all of the liquid assets in order to retain the home. Third, you may not be able to qualify for a traditional mortgage or a home equity line of credit with their current income. And finally, if you cashed out their spouse’s portion of equity, there are no monthly mortgage payments which can free up a tremendous amount of monthly cash flow.
Making the Home More Affordable – If you are awarded the home in the divorce and want to keep it, affordability may be an issue. You may not have enough income to cover the mortgage payment plus other debts and living expenses.
There are three reasons to consider a reverse mortgage when there is a current balance on the mortgage, besides making the home affordable. First, if you sold the home, there may not be enough equity to purchase another home. Second, renting a home or apartment will probably be more expensive than paying taxes, insurance and other costs associated with keeping the home. Finally, depending on the value and mortgage balance, you may be able to gain access to additional equity which they could use to supplement you income or retirement accounts.
Selling the Home and Buying Another – Using a reverse mortgage to purchase a home could mean a fresh start for both people in the recently ended relationship. This scenario is wholly dependent on the value of the home and the amount of equity in the property. With a reverse mortgage purchase, borrowers will typically need 50% or less down to purchase a home, depending on age.
Assuming each spouse walked away from the sale with $140,000, they could purchase a $280,000 (roughly) house or more depending on their age. This could put each spouse into a very comparable home to the one that was just sold and there are no monthly mortgage payments. Taxes, insurance and maintenance of the home are still required to be paid.
Call me today for a free custom tailored reverse mortgage analysis at 541-773-3131. Or give me a call with any questions you may have about the loan. I am happy to help in any way I can.
I look forward to hearing from you.
Matt Allen MLO-254296
Sr. Reverse Mortgage Banker
Phone: (541) 773-3131
Toll Free: (888) 382-9590
Fax: (541) 773-4981
Credit on approval. Terms subject to change without notice. Not a
commitment to lend. NMLS 1477/WA-CL 1477. Equal Housing Lender.
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