Going through a divorce later in life presents a specific set of financial concerns. In many cases, seniors face the reality of a reduced cash income and are forced to sell their house as a part of a settlement agreement. For a divorcee that is reluctant to walk away from a place that they think of as home, a reverse mortgage can be a clever way to increase monthly income to the point that giving up the home is not necessary.
A recent Forbes Magazine article focused on the benefits that a reverse mortgage can grant to recently divorced seniors. A reverse mortgage is a home loan that is designed to provide cash to a homeowner, age 62 or older, using the equity built up in their homes. The loan amount depends upon the age of the borrower and the value of the equity in the home. Borrowers are required to pay property taxes, insurance and keep their houses maintained. The borrower retains ownership, and lives in the home as long as they like. For a divorced retiree, this type of loan offers some unique benefits that could enable her to retain the house.
First of all, The Wall Street Journal reported that taking a reverse mortgage could create a reduction in a borrower’s income tax bill by using the non-taxable reverse mortgage cash flow rather than taxable withdrawals from a 401(k) or other retirement investment, to pay off a traditional mortgage. Another option would be to strengthen your retirement income by delaying your Social Security payments and using a reverse mortgage as a source of income. In this way, borrowers can increase the Social Security income that they will eventually receive.
Retirees can also make up for depressed investments. Using the income from a reverse mortgage can enable borrowers to hold on to their temporarily depressed investments long enough for them to rebound and begin performing again.
Divorce is never a pleasant experience at any stage of life. Reverse Mortgage Professionals can help make the financial adjustment less worrisome and enable seniors going through this transition to keep their houses and their familiar surroundings.