People who divorce later in life has less time to recover financially than those who divorce at a younger age. For older people getting a divorce, it’s crucial to plan carefully to ensure the greatest degree of financial security once the papers are signed. For some, a reverse mortgage may be the key.
How it works
With a reverse mortgage, your bank will pay you monthly amounts that correspond to a portion of your home equity. This can go on until you move out or until you die. If you die while you have a reverse mortgage, either your estate will pay out the balance of your reverse mortgage, or else your house can be sold and the proceeds from the sale will pay the balance.
In order to qualify for a reverse mortgage, you must be at least 62 years of age. You must also own your home outright, or owe a small amount on the mortgage. You must also use your home as a primary residence. In other words, you can’t get a reverse mortgage on a second home or a vacation home.
Two people, two houses
For older couples getting a divorce, a reverse mortgage can help both spouses with their future housing needs. For example, traditionally when a couple gets divorced, they may sell the house (or one person will buy out the other) and then go on to buy separate houses. With a reverse mortgage, however, if one spouse doesn’t have the money to buy out the other, they can tap into the equity of their home in the form of a reverse mortgage in a lump sum. In this case, the spouse who gets the reverse mortgage can stay put while paying the other off with home equity.
With people living longer, gray divorces are on the rise. There are tools to help older people transition to a new life after divorce–a reverse mortgage is just one of them. An experienced family law attorney can help tailor a plan to your unique situation.