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Focus: reverse mortgages and elderly divorced persons

What can an older divorced person do while continuing to live in his or her longtime Florida home and having problems making ends meet?

Many older persons live alone following a divorce while confronting troublesome money issues. Financial constraints can owe to a number of factors, including some of the following:

  • a drop in income caused by stock and/or bond holdings that have fallen in a depressed market
  • a disinclination to use money presently held in tax-sheltered vehicles for current expenses
  • a hands-off period during which a person is waiting for benefits (such as higher Social Security earnings) to vest

Where can extra cash for medical expenses, food, bills and other needs come from? Is there an alternative source of income that some people might be able to tap from a resource they don’t customarily think about?

For some people, there is. Many people have heard of a reverse mortgage, which is a loan that can make eminent sense under certain circumstances.

That’s the catch: Appreciating what those circumstances are requires a careful weighing of all the pros and cons that might feature with a reverse mortgage in a given case.

Such a mortgage first requires that a homeowner have sufficient equity in property to make it suitable as collateral to borrow from. In a reverse mortgage, the lender/borrower hats are switched, with the former making payments to the latter.

Those payments can go far toward supplementing limited income, toward helping a person avoid using currently depressed assets to pay bills presently owing, and toward enabling that person to wait for Social Security benefits until it makes optimal sense to collect them.

In most cases, the “catch” is that the house will ultimately be sold at some point to pay back the lender. Whether that ends up as a good deal or not for the borrower depends on a number of factors.

Many people understandably have a number of questions concerning a reverse mortgage. An experienced divorce attorney can help answer them and also recommend other professionals as necessary to provide answers and act in a client’s best interests.

Source: Fobes, "How reverse mortgages can benefit older divorcing women," Jeff Landers, Sept. 24, 2013

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