How Reverse Mortgages Support Divorced Seniors
Divorce can be emotionally and financially challenging, regardless of the circumstances. For retirees, the financial strain can be even greater due to the limited options for cash flow. To alleviate the financial stress of divorce, many seniors turn to reverse mortgages. By leveraging an already owned asset—their home—a reverse mortgage can provide much-needed financial relief. In this blog, we’ll explore some of the many ways that reverse mortgages can support divorced seniors.
The Changing Demographics of Divorce
According to Statistics Canada, although the divorce rate in Canada has been decreasing, the average divorce age has steadily increased over the last four decades — rising from 36.2 years in 1980 to 46 years in 2020.
With divorce more frequently affecting people in the later stages of their lives, it’s crucial for seniors to be well-informed about the financial options available to them. After all, divorce can bring numerous financial challenges, with one of the most significant being the separation of assets. More specifically, the division of the family home can be extremely strenuous. This is where a reverse mortgage can help.
What is a Reverse Mortgage?
A reverse mortgage is a financial loan available to homeowners who are at least 55 years old. This loan allows them to borrow against the equity in their home without having to sell the property or move out.
Once approved, the lender pays the homeowner in a lump sum, in regular payments, or through a combination of the two. The loan is repaid when the homeowner sells, moves out, or passes away.
Benefits of Reverse Mortgages for Divorced Seniors
Income Supplement
Divorce often results in the division of assets, leaving one or both partners needing additional income, especially during retirement. A reverse mortgage allows divorced seniors to tap into the equity of their home to supplement their income without selling the property.
Keep Your Home
Many divorced seniors may want to remain in their homes for emotional or practical reasons. A reverse mortgage enables them to access home equity while retaining ownership and residency rights.
Support Your Children
Taking out a reverse mortgage can provide divorced seniors with additional financial resources, enabling them to support their children in various ways. The freed-up home equity can help seniors support a myriad of their children’s significant life events, such as paying for a wedding, assisting with a down payment on a home, or covering education expenses. By utilizing a reverse mortgage, divorced seniors can provide meaningful financial support to their children, enhancing their financial security and overall well-being.
Flexibility
Reverse mortgages offer various disbursement options, such as lump sums, monthly payments, or lines of credit. This flexibility allows divorced seniors to tailor the loan to their specific financial needs and goals.
No Impact on Social Assistance
In some cases, traditional forms of income, such as pensions or investments, can affect a person’s eligibility for certain government benefits or social assistance programs. Since reverse mortgage proceeds are not considered income, they typically do not impact eligibility for these programs, providing divorced seniors with a stable financial option.
Non-Recourse Loan
In Canada, reverse mortgages are non-recourse loans, meaning that the borrower (or their estate) is not personally liable for any loan balance exceeding the home’s value at the time of sale. This protects divorced seniors and their families from stressing over fluctuations in the housing market and, ultimately, owing more than the home is worth.
Explore Your Options with Seniors’ Lending Centre
While the benefits of reverse mortgages can vary depending on individual circumstances and location, they highlight some of the potential advantages that reverse mortgages can offer divorced seniors. With 15 years of experience specializing in the financial needs of seniors, Seniors’ Lending Centre can help you plan for the future. Contact us today to learn if a reverse mortgage could be the right choice for you. We would love to help you navigate the difficult decisions and achieve financial stability.
