Most likely you've seen the television advertisements for reverse mortgages, where actors from decades past tout the advantages of this product for older people, such as being able to access the equity they have in their home and not having to repay the mortgage until the last homeowner leaves the home. While it's wise to be skeptical of anything that could impact the financial security of your home, some experts say that reverse mortgages may be a good choice for older divorcing couples. This is a group that has been significantly increasing in recent decades.
Unique Challenges for Older Divorcing Couples
Couples who divorce in the latter decades of their life generally face different financial challenges than their younger counterparts. Their retirement years are closer, so ensuring that they don't jeopardize their retirement savings with an unfavorable asset division is essential. They also generally have greater and more complicated types of assets to divide.
The largest and most important of these is the family home. In "gray divorces" it's more likely that one of the spouses will want to remain in the home. He or she may have lived there for many years and raised the family there. Friends and favorite gathering places are likely nearby. Further, it's simply more difficult to move and adjust to a new home when you're older.
For younger divorcing couples, it's often financially impossible for one spouse to afford to keep the home. Often he or she ends up selling the home and dividing the profits. If one spouse is financially able to afford to stay in the home, he or she may refinance the mortgage and take over the mortgage payments.
Accessing Liquidity Without Making Mortgage Payments
For older couples who have been making mortgage payments for many years and have considerable equity in their home, a reverse mortgage may be a good solution for both spouses. As one taxation professor explained in Forbes magazine, "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."
Whether you and your spouse agree to a reverse mortgage or elect to refinance your current one, it's important to shop around for the best product. As with any major decision you make during your divorce, it's essential to discuss the legal, financial and tax ramifications with your family law attorney and other professionals.
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