A Housing Solution For “Gray” Divorce Clients

Divorce Decree

Demographic studies reveal that Baby Boomers currently aged 52-70 have the highest rate of divorces and 2nd marriages.  Some of those baby boomers have delayed divorcing until their senior years. “55% of couples were married more than 20 years” according to a report by Susan L. Brown and I-Fen Lin, sociologists at Bowling Green State University.

Divorcing later in life presents more financial problems.    The biggest issue being the home as it is the single largest investment couples purchase together.

  • Do we sell and split the proceeds?
  • What are the tax consequences?
  • Do I buy my spouse out?
  • Can I afford the house on my own?
  • Am I trading equity for liquid assets?
  • I’m ready for Retirement and how will I start over?

All very valid concerns.  The bottom line is both parties will need shelter– whether it is paying a mortgage or paying rent.  Being a Mortgage Consultant I see no upside to paying rent.

If there is enough equity in the house to do a cash-out refinance here are some options:

  • One spouse buys the other out with a Reverse Mortgage and has no mortgage payment.
  • The departing spouse can purchase a new home with a Reverse Mortgage with 50% down and have no mortgage payment.
  • Sell the home, split the proceeds and each buy a new home with 50% down using a Reverse Mortgage for Purchase with no mortgage payment.

By the time we reach retirement we shouldn’t have a housing payment.  Since retirees don’t have the same income coming is as when they were working it just isn’t affordable.

Nobel Prize-winning economist Robert Merton said in a recent article “the idea of leaving the house as a bequest is flawed”.  He continues “we need to start thinking about the house differently, viewing it as an asset rather than treating is as part of our legacy”. “The house is like an annuity.  It provides the housing you need for as many years as you need it”.

Forget what you “think” you know about Reverse Mortgage.  Get the facts of how it can be a responsible tool for retirement.