Financially speaking, a divorce is not easy, especially if the couple is getting close to retirement and doesn’t want to lose their personal savings from paying for the divorce. A reverse mortgage, however, is one way couples who are getting divorced could ensure their retirement accounts won’t be touched and still get on with their individual lives, explains a recent article from Investment News.
In the past it wasn’t uncommon to see couples divorcing in the 40’s or 50’s once their kids moved out of the house, but now kids are living with their parents longer and it’s pushing back the age couples are getting divorced.
“For those 62 and over, a reverse mortgage should be considered in the financial tool box as it can turn a home into a generator of cash to bridge the budget gap,” says Andre Samalin, principal of Samalin Investment Counsel and former president of the Association of Divorce Financial Planners, in the article.
There are two options a reverse mortgage can provide in a divorce, Shelley Giordano, chair of the Funding Longevity Task Force says in the article.
“By providing financing without a monthly debt obligation, each former spouse can enjoy equal housing without necessarily requiring portfolio distributions,” the article states. “Retirement security is enhanced for both without downgrading the living situation for either.”
The first option would be in the case that the spouse remaining in the home can take a lump sum distribution from the reverse to buy out the other spouse. The second spouse could use the proceeds for a down payment on a new home and then use a reverse mortgage for purchase to pay the rest of the cost of a new home.
The other option could be that the martial home be sold and each ex-spouse could used some of the proceeds then each could take out a reverse mortgage for purchase to fund the purchase of their new homes.
Read the full article at Investment News.
Written by Alana Stramowski