Can A Reverse Mortgage Benefit A Divorce Settlement?

photo-1515180711443-f8685c6d6a74Divorce shouldn’t mean your life is over, but rather a new beginning to living life according to your rules. “Grey divorce” is becoming quite common as nearly one in ten marriages ends after being together for more than 40 years, according to Pew Research. As for the causes, this has been happening for various reasons – one of which is due to retirement. Elderly couples are looking to make their golden years enjoyable, even if life was either too busy or stressful in the past. So, can a reverse mortgage benefit a divorce settlement?

Dividing the Assets

Seniors often have many assets that are shared and nearly impossible to split. During negotiations, a family home is often one of the most sought-after assets as they are usually paid off and hold a lot of equity. That is why divorcees over the age of 63 are looking to compromise on a divorce settlement and help settle their assets with the help of a reverse mortgage. One of the benefits of a reverse mortgage is how it allows one partner to continue living in the home without paying for a mortgage nor have access to equity funds.

Splitting the Benefits of Homeownership

During the divorce settlement, splitting the home asset is usually the first decision to make. Instead of selling the home entirely, spouses could choose who can stay in the home and keep the reverse mortgage while the other party receives the equity funds. This useful tool helps couples reach an agreement without further complications. However, it is important to understand that the spouse who continues to stay in the home will be held responsible for certain obligations such as homeowners insurance and property taxes.

Provide Less Drastic Financial Changes

Perhaps the couple is used to living off two solid incomes – whether it be from owning a business, social security, or pensions from their retirement. After a divorce, both parties will be forced to adjust to the sudden drop in income. In some cases, getting the home in the settlement can be a huge benefit. The funds may come in a line of credit, monthly installments, or a lump sum. Additionally, if you plan to sell the home, using a reverse mortgage can help you purchase an entirely new home within your price range. What’s more, you will not have to worry about making the mortgage payments.

Author of this article, Lucy Wyndham, is a freelance writer and former Financial Advisor. After a decade in industry, she took a step backward to spend more time with her family and to follow her love of writing.