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Marriage splits between Americans age 50 and older have been on the rise in recent years, making “gray divorce” an increasingly common phenomenon among the nation’s retiree population. Led by Baby Boomers, divorce rates have roughly doubled for America’s 50+ population.1
There are a number of reasons why “gray divorce” is on the rise. Perhaps chief among them is the simple fact that Americans are living longer and healthier than ever before.2
Surviving on one income can pose some significant financial challenges for retired divorcees, especially if they have been accustomed to sharing income with their former spouses. Depending on the particular situation, a reverse mortgage may be a practical financial solution in a divorce settlement.
There are a lot of decisions that need to be made during a divorce settlement, not the least important of which is deciding what happens to a home belonging to both spouses. If one spouse wishes to remain in the home, or if both spouses choose to leave altogether, a reverse mortgage can potentially help in either situation.
If one spouse wishes to stay:
For the spouse who wishes to remain in the home – and with enough equity and eligibility – he or she can potentially take a reverse mortgage in a lump sum distribution and use the loan proceeds to buy out the other spouse. This allows the spouse electing to stay in the home to have no monthly mortgage payments.*
If both spouses agree to sell the house:
If neither spouse wants to continue living in the marital home and they elect to sell, he or she can potentially use a reverse mortgage to purchase another residence. A HECM (Home Equity Conversion Mortgage) for Purchase (H4P) allows homebuyers age 62 or older to purchase a new principal residence using loan proceeds from the reverse mortgage.
Not only does the H4P enable borrowers to have no monthly mortgage payments*, but it also allows them to reduce closing costs and other fees since both the home-buying and loan processes are combined into a single transaction. The borrower provides a down payment that can typically be about half of the purchase price of the new home.
To learn more about reverse mortgages and how they can help supplement retirement income, please contact a Finance of America Reverse mortgage professional today.
*The borrower meets all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
1 Renee Stepler, “Led by Baby Boomers, divorce rates climb for America’s 50+ population,” Pew Research Center, FACT TANK, News in the Numbers, March 9, 2017. http://www.pewresearch.org/fact-tank/2017/03/09/led-by-baby-boomers-divorce-rates-climb-for-americas-50-population/
2 Caryl Rivers and Rosalind C. Barnett, “Gray divorce: Why your grandparents are finally calling it quits,” OpEd, Los Angeles Times, 9/28/16. http://www.latimes.com/opinion/op-ed/la-oe-rivers-barnett-gray-divorce-20160928-snap-story.html