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A reverse mortgage may help some divorcing couples with housing

The Society of Actuaries says that Americans are living longer. Statistically, half of all women and a third of all men who are in their 50s today will live to 90 years of age. Among married couples, there's a 50-percent shot that one of the spouses will live to 92.

If you're unhappy in your marriage, that's a long time to be miserable. And indeed, as longevity trends upwards, more people in the Baby Boom generation are getting divorces. This trend is often referred to as "gray divorce" -- divorce over 50.

The issues involved in a gray divorce can be different from other couples' experience. Most people in their 50s no longer have small children to raise, so child support and custody recede as crucial issues. According to the American Academy of Matrimonial Lawyers, the top issues of dispute in gray divorces are:

  • Alimony
  • Division of retirement accounts and pensions
  • Division of business interests
  • Division of the family home and other real estate

That's not terribly surprising. Recent research by the National Center for Family & Marriage Research at Bowling Green State University points to the fact that divorce after 50 could put ex-spouses behind when it comes to retirement security. Even dividing the family home may yield less than each spouse needs individually for a comparable living situation.

One tool that may help older divorcing couples is the reverse mortgage. We recommend seriously considering the option, but only after a serious discussion with your divorce attorney or a financial planner. No financial tool is right for everyone, and reverse mortgages may have downsides in your situation.

What could a reverse mortgage be used for in a divorce? Often, one member of the divorcing couple wants to remain in the family home but can't afford to buy out the other spouse's interest. If the spouse who wants the house qualifies, they could take out a lump-sum distribution from a reverse mortgage and use it to pay most or all of that buyout.

Whether you choose that path or sell the home and divide the proceeds, a reverse mortgage-for-purchase could allow one or both spouses to buy another home at a lower initial cost.

The reality is that divorce often entails a degree of financial loss as one household is divided into two. People who divorce younger have longer to recoup that loss. Older people who divorce have to find ways to reduce their monthly bills -- and ideally, they should have some investments that provide cash income. In the right circumstances, a reverse mortgage may turn a monthly bill into a cash generator.

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