Divorce rates across the US are falling steadily, and reached a 40-year low in 2016. There are numerous theories as to why – perhaps it is because fewer people are getting married in the first place, or maybe it is the case that when they do marry, it is typically after many years together. The old proverb of “marry in haste, repent at leisure,” might finally be sinking in!
One demographic that has bucked the trend, however, is the over 60s. They have actually seen a significant increase in divorce rates over recent years. While you might initially feel there are fewer complications for older divorcees in terms of childcare and access, the financial complexities can be greater.
It is no secret that pension funds are performing below many retirees’ expectations, and today’s seniors are finding it hard to make ends meet. To then be faced with the prospect of dividing resources that are already stretched, in order to provide for both parties can seem impossible. A potential answer is to leverage the equity in the matrimonial home by way of a reverse mortgage.
How does it work?
By the time they reach their 60s, most couples own their homes outright, and with today’s real estate values at an all time high, that means there is a tidy sum tied up in the marital home. Of course, selling it is one option, but the concept of a reverse mortgage allows one party to remain there, and to raise some funds to “buy out” their former spouse.
The major difference between this and a conventional mortgage is that there are no monthly repayments. Provided the homeowner remains living in the property, the sum only needs to be repaid when they either sell or pass away.
Most lenders will offer a reverse mortgage to any homeowner over the age of 62 (although the exact age varies between lenders). In some cases, they will even be available if there is a conventional mortgage balance outstanding, although this depends on the sums involved.
Look before you leap
The reverse mortgage market can provide a perfect financial solution for couples who decide to become singles later in life. Like any financial product, however, it is important to evaluate all the options, look carefully at charges and interest rates and get some independent financial advice before you make a final decision.