Housing options for divorcing homeowners age 62 and older

When divorce involves a home, deciding what happens to that property can be one of the most important financial decisions a couple faces.

One spouse may want to remain in the home. Both spouses may need to purchase new homes. Or there may be significant equity in the marital home that could create options for each person moving forward.

For homeowners age 62 and older, qualifying for a traditional mortgage on retirement income or using a large portion of retirement savings to purchase another home may not always be the best - or only - option.

One possibility worth understanding is a Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage.

What Is a HECM Reverse Mortgage?

A HECM is a reverse mortgage insured by the Federal Housing Administration (FHA). For eligible homeowners age 62 or older, it allows a portion of home equity to be used without requiring monthly principal and interest mortgage payments.

A HECM can also be used to purchase a new primary residence. The homeowner contributes an eligible amount toward the purchase, and the HECM finances the remaining allowable portion.

This can be particularly interesting in a gray divorce, when preserving retirement assets and monthly cash flow may be an important part of planning for life after divorce.

When Could a Reverse Mortgage Be Considered During Divorce?

• Are 62 or older
• Have substantial equity in your marital home
• Want to remain in the marital home after divorce
• Plan to sell and purchase another home
• Are concerned about qualifying for a traditional refinance or mortgage
• Want to explore ways to preserve retirement savings and monthly cash flow

An Example

Consider a divorcing couple who are both 68.

They sell their marital home and divide the available equity as determined through their divorce. Each wants to purchase a new home but doesn't necessarily want to use all of their available cash or take on a traditional mortgage payment.

Depending upon their individual circumstances and eligibility, each could potentially use a portion of their proceeds toward the purchase of a new primary residence and finance an allowable portion through a HECM for Purchase.

That could provide each person with a home of their own without required monthly principal and interest mortgage payments, while allowing them to preserve more of their retirement assets for other needs.

Does a Reverse Mortgage Mean You Have No Housing Expenses?

No. This is an important distinction. A reverse mortgage eliminates required monthly principal and interest mortgage payments, but homeowners remain responsible for expenses including property taxes, homeowners insurance, property maintenance and applicable association fees.

The home must also remain the borrower's primary residence, and borrowers must meet HECM eligibility and financial-assessment requirements. HUD-approved HECM counseling is required before obtaining the loan.

The Real Estate Decision Should Be Part of the Bigger Picture

A reverse mortgage isn't right for everyone. But if you're divorcing - or even beginning to consider divorce - and you're over 62 with significant home equity, it may be an option worth discussing before deciding what happens to the house.

As a Certified Divorce Real Estate Expert® (CDRE®), I help divorcing homeowners understand their real estate options, determine the value of the marital home, consider realistic timelines, and understand what selling, staying, or purchasing another home could look like.

You don't need to have decided whether you're keeping or selling the house before reaching out. Understanding your options early can help you ask better questions and make more informed decisions as you plan your next chapter.

Leslie Glazier, CDRE®
@properties Christie's International Real Estate
Chicago & North Shore

Important: This information is for educational purposes only and is not legal, tax, financial, or lending advice. Reverse mortgage eligibility, costs, loan amounts, and suitability vary by borrower. Consult with your attorney, financial advisor, and a qualified HECM lending professional regarding your individual circumstances.