Submitted by Sheryl Hanson
A “Silver Divorce” refers to a divorce that occurs later in life, typically involving couples who are over the age of 50 or 60. Silver divorces are becoming more common as societal norms around divorce have changed, and people are living longer and healthier lives.
Divorcing later in life can present unique challenges. A major challenge specifically to silver divorces are the financial implications.
Dividing assets accumulated over many years can be complex, including retirement savings, investments and real property. Financial planning and understanding the long-term conseuences of the divorce settlement are crucial.
Perhaps the most significant decision you’ll have to make regarding assets involves deciding on trying to keep the family home or selling it and splitting the proceeds. Many people try to hang on to the family property for sentimental reasons or to continue raising children who are not yet out on their own. Make sure you are aware of all tax consequences when you make your decision to sell or keep the home.
In either case, where both spouses were living in the same property before, now they will need two households. If one spouse keeps the house, that person will need to buy out the other and with those proceeds, the spouse moving out will need to purchase a replacement home. Or if the family home is sold, how much home can each spouse purchase with the net proceeds. Also, in retirement, if either party is no longer working, that adds a new wrinkle to the equation since qualifying for a new mortgage could be difficult.
If you only have retirement income, you may not qualify for a traditional mortgage where you will have to pay the principle and interest along with taxes, interest and home maintenance. Because of those challenges, many people may have to take funds from their retierment nest egg to fund the purchase a home that they can afford and want to live in. Fortunately, there is another option.
One home loan product to consider, before you consider dipping into your retirement nest egg to purchase a new home with limited funds, would be a reverse mortgage. Yes I know that they had a bad rap many years ago, but that is not the issue any longer. With a reverse mortgage you don’t need to have to take the extra cash from your retirement savings to move forward without mortgage payments. Depending upon your age and the current interest rates, you may only have to put about 50% down to purchase you replacement home from the proceeds of your share of the equity. You would stll need to be able to pay the taxes, insurance and maintenance, but you would not have a mortgage payment.
Getting the reverse mortgage could enable you to find a home withouot taking frunds from your retirement account and thereby increasing the funds you will have available to suplement your retirement.
There are 2 ways you can structure the reverse loans in a silver divorce situation. For example, if one spouse choses to remain in the family home, then that person could refinance the home with a reverse mortgage and could provide a lump sum of cash to the other party from the refinance. On the other hand, if both parties agree to sell the family home, then the net proceeds from the sale of the home could be split and each could then use those funds to purchase a home with about 50% down using a reverse mortgage and no principle or interest would be needed each month.
Qualifying for a reverse loan is much easier than a traditional mortgage because basically you just need to qualify for the taxes and insurance since you won’t have a mortgage payment each month. Also no FICO Scores are looked at in qualifying for the reverse mortgage.
I would ve happy to provide examplese of what a reverse mortgage could look like. Obviously, each case will be different as the age of each person and the current inerest rates are taken into account in determining the buy out funds available from a reverse mortgage on the family home or the down payment needed on the replacement home.
If you are thinking about exploring this option, the best thing to do is to contact a local reverse mortgage specialist and have a plan worked out for your specific situation.
Contact Sheryl Hanson for more information. She can be reached at 916-616-1599 or via email at shanson@wmreverse.com. Check out her website at www.sherylhanson.com