Divorces can be messy situations for couples planning to split their estate. Aside from the emotional complications, divorcing homeowners must also consider the financial implications of their split, especially if they are nearing retirement.
As Baby Boomer divorce rates rise, some might benefit by using reverse mortgage to assist with the growing trend of “gray divorce,” according to a recent Forbes article penned by Jamie Hopkins, associate professor of taxation at The American College in Bryn Mawr, Pa., and co-director of the school’s New York Life Center for Retirement Income.
Increasing divorce rates among Baby Boomers entering retirement is creating a new set of financial and retirement challenges as couples decide what to do with their accumulated wealth, and more importantly, what will become of perhaps their greatest shared asset: the home.
“While dividing a 401(k) or IRA is very important, the largest asset for the American couple is still the home,” Hopkins writes. “Splitting up a home also creates unique challenges because the home provides housing services.”
Not only is the home where the couple lives, but it is likely where at least one of them will continue to live after the divorce is finalized. In helping couples divide assets in a divorce, reverse mortgages are often an overlooked and underutilized tool in these situations.
“A reverse mortgage can be used to provide the liquidity needed to help divide the value of the home, paying out the spouse who wants the money while allowing the other spouse to remain in the home without making any mortgage payments,” Hopkins writes.
Since reverse mortgages do not require monthly payments, and repayment is not due until the last homeowner vacates the home, a reverse mortgage can help remove some of the burden from the divorce process that is already filled with both financial and emotional stress, said Gregg Smith, president and chief operating officer at One Reverse Mortgage.
“Traditionally, if one spouse wants to stay in the home after a divorce they would have to refinance the mortgage to take the equity they owed the other spouse out of the home—although it would leave the spouse remaining in the home with added mortgage payments,” Smith said in the article.
*Reverse Mortgages are a brokered loan product. This material is not provided by, not approved by the Department of Housing & Urban Development (HUD) Or by the Federal Housing Administration (FHA) .
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