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.