Why a Reverse Mortgage Might Be Viable in a ‘Gray Divorce’ Situation

“Gray divorce” – referring to the decision of a couple over the age of 50 to separate – is a growing phenomenon. According to a 2022 study published in the Journals of Gerontology, the divorce rate among people age 50 and older has doubled since 1990 and tripled among people age 65 or older.

Gray divorces can pose a myriad of financial problems for those determining what life after marriage will be like and how to separate previously intertwined financial situations. Housing is such a problem, but a new column published by Success magazine suggests that a reverse mortgage could play a supporting role.

Nancy Hetrick, founder and CEO of Smarter divorce solutions and a financial divorce analyst discussed the ways a reverse mortgage can be used to divorce couples who meet loan qualification standards.

Hetrick told the newspaper that these loans “are now fully regulated and insured and are no longer the scam vehicles they were in the 1980s,” according to the column. The Home Equity Conversion Mortgage (HECM) program was created through legislation in 1988, with the first loan under the program made the following year.

“It’s just a great example of flexibility and creativity for these couples,” she told the newspaper, adding that the partner moving out of the marital home could explore a HECM for Purchase (H4P) loan using the equity that they have acquired. But living at home later in life can also prove to be a bad combination, given the natural limitations that come with aging.

“Maybe this is an opportunity for both of them to reimagine the final phase of their lives,” she said.

Earlier this year, Finance of America (FOA) vice president of retirement strategies Steve Resch shared HousingWire‘s Reverse Mortgage Daily (RMD) that many of its financial planning colleagues are increasingly confronted with gray divorce issues.

“Another possibility is the H4P,” Resch said in May. “Planners often don’t realize that they can do something with this, and many of us are now dealing with gray separation scenarios. Another scenario where this really comes in handy is moving.”

“A lot of people have moved to Florida, and when one spouse dies, they move back to be close to family,” he added. “So I think there’s a huge opportunity there. Gray divorce, eliminating mortgage payments, and managing risk in long-term care – these really are the biggest opportunities in my view [for the reverse mortgage industry].”