Divorce among seniors is becoming more common. With retirement often lasting decades rather than just a few years, many people are choosing to make the most of their later years, even if that means making a major life change.

While the emotional side of a divorce can be difficult, the financial aspects can be just as complex. One of the biggest assets often involved is the home, which may be fully paid off or have significant equity. For individuals aged 62 and older, a reverse mortgage can offer a helpful solution for dividing assets and maintaining financial independence.

Scenario 1: One Spouse Stays in the Home

Instead of selling the home and dividing the proceeds, one spouse could choose to remain in the home and take out a reverse mortgage. The proceeds from the loan can be used to pay the other spouse their share of the equity, allowing both parties to move forward.

If the divorce is finalized before the reverse mortgage closes, the financial settlement can often be incorporated into the loan itself. In this case, the reverse mortgage becomes part of the broader divorce agreement. The person who remains in the home will still be responsible for ongoing housing expenses, including property taxes, homeowner’s insurance, and maintenance.

Scenario 2: Transitioning to a Single Income

Going from two sources of income to one can be a major financial shift, whether it’s from wages, Social Security, or pensions. Securing the home in the divorce can provide a foundation for stability. After the divorce is finalized, the single owner can take out a reverse mortgage on the home to create cash flow.

Funds can be accessed in monthly installments, as a line of credit that grows over time, or as a lump sum—depending on what fits best. If moving is preferred, a reverse mortgage for purchase could be used to buy a new home, often expanding your range of options. Either way, you’ll enjoy the benefit of not having a monthly mortgage payment.

Exploring Your Options

If you’re going through a divorce or considering one, a reverse mortgage may be a practical financial option. Reach out anytime to learn more about the process.

Jan Jordan and Kelsey Jorck are Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado.  Click here to contact them and learn if reverse mortgage is right for you.

Decades ago, when our parents were working and raising a family, they looked at retirement as the true golden years.  It would be a time when they stopped working and lived off the fruits of their savings and investments.  Retirement planners used a three-legged-stool strategy back then.  The make up of this stool was Social Security, employer-sponsored retirement plans, and personal savings.  But somewhere between their retirement and now this stool became unbalanced – and now today’s retirees are needing to compensate for it.  But how?

First, it’s important to remember that these three components of retirement are still an integral part of retirement success, which is why it should be considered how they can be best utilized as well as protected.  But it’s also important to consider what else has changed – things like life expectancy, a more active retirement, and a move toward non-traditional and even extravagant retirement goals.   Why not have it all?  And what are the options to achieve it?

Part-Time Work: It’s not uncommon for retirees to utilize a phased retirement strategy, where they can work and begin receiving benefits.  In addition to the obvious point of this – additional income – working can help to delay Social Security benefits, as well as keep older people engaged in the community.  

Reverse Mortgage: For those with substantial equity in their homes, a reverse mortgage can be an excellent way to balance out that stool analogy with a fourth leg, or simply get the boost retirees need to live that extravagant retirement life they’ve been dreaming of.  Funds are available via a line of credit, monthly installments, a lump sum, and even to purchase home (or a combination).  Because the income is not taxed, it can be used strategically with investments, or used to delay Social Security benefits.  Another common function is a stand-by strategy that taps the line of credit now, but only uses it during bear markets to protect investments.  These FHA backed reverse mortgages do not incur any mortgage or loan payments, although borrowers must keep up with homeowner’s insurance, property taxes, and other associated costs.  In addition to living mortgage payment free, they can actually eliminate any existing mortgage or HELOC payments, and the loan is not payable until the last borrower passes away or permanently leaves the home.  

Downsizing and HELOC’s:  When considering how to make ends meet during retirement, downsizing is often part of the conversation.  Selling the home and moving to smaller one, then using any additional equity as a retirement funding source.  For anyone considering this, I’d suggest looking at the details of a Reverse Mortgage for Purchase prior to making a final decision.  A Reverse Mortgage for Purchase option can allow buyers to get more house for their money, while still having cash to stash away for retirement. 

A Home Equity Line of Credit (HELOC) is another common solution.  When going this route versus a reverse mortgage, ensure the new monthly payment will not cause damage down the road if other needs arise, like medical care.  

Reverse mortgages certainly won’t be right for everyone, but for many they can be used creatively to aid in funding today’s retirement that is so different than what we are used to.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.

A reverse mortgage line of credit is a financial product designed for homeowners who are at least 62 years old and have significant equity in their homes. It allows them to access a portion of their home’s value without having to sell the property or make monthly mortgage payments.

Here’s how a reverse mortgage line of credit typically works:

1. Eligibility: To qualify for a reverse mortgage line of credit, you must meet certain criteria, including age requirements and home equity. You need to be at least 62 years old, own your home outright or have a considerable amount of equity in it, and reside in the property as your primary residence. 
2. Application and Counseling: You’ll need to apply for a reverse mortgage through a lender approved by the Federal Housing Administration (FHA). As part of the process, you’ll be required to attend counseling to ensure you understand the terms and implications of the loan. 
3. Loan Calculation: The amount you can borrow is determined based on several factors, including your age, the appraised value of your home, and current interest rates. The older you are and the more valuable your home, the larger the potential loan amount. 
4. Line of Credit: Instead of receiving a lump sum, a reverse mortgage line of credit provides you with a pool of funds that you can access as needed. This line of credit can grow over time, allowing you to access more funds in the future. The unused portion of the line of credit can also earn interest, which increases the available funds. 
5. Repayment: The outstanding loan balance, including any accrued interest, becomes due when you sell the home, move out permanently, or pass away. Typically, the home is sold, and the proceeds are used to repay the loan, but because these loans are FHA-backed, no one will ever owe more than the home is worth at the time the loan comes due. If the sale proceeds exceed the loan balance, the remaining amount goes to you or your estate. 
6. Flexibility and Payments: One advantage of a reverse mortgage line of credit is that you have the flexibility to choose when and how much to borrow. You can access funds at any time, and you’re not required to make monthly mortgage payments. However, you must continue to pay property taxes, homeowner’s insurance, and maintain the property. 
7. Interest and Costs: Like any loan, a reverse mortgage line of credit accrues interest over time. The interest rate may be fixed or adjustable, depending on the terms of the loan. Additionally, there are upfront costs involved, such as origination fees, closing costs, and mortgage insurance premiums.

It’s important to note that while a reverse mortgage line of credit can provide financial flexibility for seniors, it’s crucial to work with a reputable lender to ensure you thoroughly understand the terms. 

Jan Jordan is a Reverse Mortgage Specialist serving the Erie, Dacono, Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming.  Contact Jan and Kelsey to learn if a reverse mortgage is right for you.