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Reverse mortgages are used to fund gray divorce home buyouts

HousingWire notes that the tool can help a spouse stay in the home by using a reverse mortgage to cover an equity buyout while avoiding a required monthly principal and interest payment for eligible borrowers 62 and older.

Reported · Written up by our desk · Mortgages

Gray divorces, which often occur after retirement when income is largely fixed, can stretch budgets and split assets into two households. HousingWire points to research cited by The New York Times showing U.S. gray divorce rates doubled between 1990 and 2010, highlighting how later-life breakups can make financial recovery harder.

HousingWire, citing a think piece by loanDepot’s Lisa Moriello, says the stakes are higher for older adults because they have less runway to recover and may face sudden costs with limited income flexibility. Moriello also argues women often absorb a larger setback due to lower lifetime earnings and smaller retirement savings, and she notes common misconceptions about Social Security after a spouse dies.

In settlements where one spouse wants to remain in the home, a reverse mortgage may help fund an equity buyout and, for homeowners age 62 or older, can eliminate the required monthly principal and interest payment. Moriello adds that many homeowners are “house-rich and cash-flow-constrained,” a situation where traditional financing options can narrow when the need for liquidity is greatest.

HousingWire also says mortgage obligations in divorce settlements can be treated as a mandatory obligation, allowing the spouse who stays in the home to tap a lump sum from a reverse mortgage to meet the settlement terms. The piece frames housing decisions as a key factor in whether a newly single older adult can maintain financial stability after divorce.

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