P h i l l i p H . L a nd e
A B R , A S P , C D PE , C R S
4 S A L E B Y D IVO RC E Divorce & Real Estate August 2016
DID YOU KNOW? The Grey divorce is defined by the growing trend of high divorce rates among Baby Boomers. In 2009, 1/4 People over 50 divorced. In 1990, 1/10 People over 50 divorced.
The Rise of the Grey Divorce A study from Ohio’s Bowling Green State University shows that one quarter of all American divorces now involve someone 50 or over – more than double that of just 20 years ago. While those seeking late-life or ‘grey’ divorces, as they are sometimes called, tend to have a rosier outlook than their younger counterparts of life after the dissolution of a marriage, older divorces also face unique financial problems that others do not. Odds are accumulated assets, from real estate to retirement savings, are substantial and entwined, and impending retirement can make a favorable financial split particularly tricky.
According to a study from AARP, more than one in four of grey divorces fear not having enough money in their post-split lives, a fear that comes second only to loneliness. This is particularly true among women who were four times more likely than their male counterparts to be concerned with the negative effect of divorce on their finances.
IS A REVERSE MORTGAGE AN OPTION FOR YOUR GREY DIVORCE CLIENT?
Phillip H. Lande RE/MAX Legends Group/ Atlas Group Direct: 317.863.2356 plande@atlasrealty.com www.remax-atlasgroup.com
Not only may a Reverse Mortgage be a viable option for divorcing clients who want to remain in the marital home, it may be a wise financial planning decision as well. Taking a reverse mortgage can also have implications on the tax bill, and for configuring potential Social Security income. You may be able to limit the income tax exposure by using cash flow from a reverse mortgage, rather than taxable withdrawals from a 401(k) or other retirement investment to pay off a traditional mortgage or other debts. If you can delay taking Social Security by using a reverse mortgage as a source of income, you can increase the monthly payment you will eventually receive.
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Reverse Mortgage as an Option…. Summary Reverse Mortgage. The r ever se mor tgage for home pur chases is one of the most power ful tools available today. Here is a brief summary of how a reverse mortgage works.
For a purchase loan, you will need a down payment of approximately 35%. The amount of down payment is based on the age of the borrower and the calculated life expectancy. Sounds a bit morbid, however, the life expectancy is calculated to determine the estimated amount of interest that will accrue on the mortgage
during the expected life of the loan. The older the borrower, the higher the loan amount.
You will never have to make a mortgage payment! A reverse mortgage does not carry any monthly payments. All the interest that is due on the loan is simply added to the mortgage balance. When heirs inherit the property, they will need to pay off the mortgage at that time. If the balance on the mortgage exceeds the value of the home, your heirs don’t lose anything because the lender covers the difference. If
the balance on the mortgage is less than the value of the home, the heirs will receive the remaining home equity as part of their inheritance.
If the sale of the marital home is an issue for whatever reason, the divorcing clients don’t need to sell the home in order to qualify for a new reverse mortgage.
A reverse mortgage does not carry any pre-payment penalties either. This means that the reverse mortgage can pay off the mortgage any time they want.
When qualifying income is an issue a reverse mortgage may be the answer as well. Income and assets will be
verified for the ability to maintain the home, ability to pay taxes and insurance as well as living expenses.
A reverse mortgage can also be used for refinancing the marital home – it is not just used for purchasing new property. So, when you have divorcing clients and one is going to retain the marital home a reverse mortgage can offer the equity cash buy out leaving the retaining spouse with no future mortgage payments.
The bottom line is that the reverse mortgage option can empower divorcing seniors with more options to take advantage of and shouldn’t be overlooked as a viable option.
www.remax-atlasgroup.com
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A Little Humor
To find out more about the advantages of utilizing a reverse mortgage for your divorcing clients over the age of 62, please contact me directly and I will forward you additional information.
The Home Equity Conversion Mortgage (HECM) Divorcing clients over the age of 62 may have the option of utilizing a Reverse Mortgage for an Equity Buyout and keeping the home. The HECM is the only reverse mortgage insured by the federal government. HECM loans are insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD). The FHA tells HECM lenders how much they can lend you, based on your age and home value. The HECM program limits your loan costs, and the FHA guarantees that lenders will meet their obligations. HECM Benefits. The HECM pr ogr am pr ovides the widest ar r ay of cash advance choices. You can take your entire loan as a: single lump sum of cash; or “creditline” account of a specific dollar amount that you control, that is, you decide when to make a cash withdrawal from this account, and how much cash to withdraw; or as a monthly cash advance for a specific period of time, or for as long as you live in your home. In addition, you can choose any combination of these options, and change your cash advance choices at any future time. Plus a Monthly Advance. The HECM pr ogr am lets you combine a lump sum, a cr editline, or both with a monthly advance. A monthly loan advance does not increase or decrease in dollar amount over time. So it will buy less in the future as prices increase with inflation. You can choose to have monthly HECM advances paid to you for:
a specific number of years that you select (a “term” plan); or as long as you live in your home (a “tenure” plan).
A term plan gives you larger monthly advances than a tenure plan does. The shorter the term, the greater the advances can be. But the advances only run for a specific period of time. You do not have to repay the loan when the term ends, but you no longer receive monthly advances past the end of the term you select. Again, a Reverse Mortgage has many options for divorcing clients over the age of 62. Please contact me if I can provide additional information!
www.remax-atlasgroup.com
Phillip H. Lande ABR, ASP, CDPE, CRS RE/MAX Legends Group/ Atlas Group 5645 Castle Creek Pkwy N Indianapolis, IN 46250 www.remax-atlasgroup.com plande@atlasrealty.com Direct: 317.863.2356
As professional real estate agents specializing in helping divorcing couples, we are here to help both parties involved through a smooth yet emotionally difficult process when they need to sell the marital home and purchase new homes moving forward. As a member of your professional divorce team, our goal is to: 1. Help clients understand the legal and tax aspects of divorce in regards to the sale of the marital home and other real estate. 2. Offer alternatives to the usual mistrust and the emotional responses as a result of dividing real estate assets. 3. Work with both parties together to help them save and make money now and down the road with regards to real estate. 4. Work with both parties, not just one, in selling the marital home for the best price. Please don’t hesitate to call us if we can be of service to you and your divorcing clients!
R E A L E S TAT E
S T R AT E G I E S FOR DIVORCING COUPLES
With the divorce rate stable at fifty percent and home ownership at sixty-two percent, there are a lot of families who need professional guidance as they navigate what to do with their home. For most people their home is the largest asset they own, so the decision must be carefully thought out and analyzed. Now more than ever a full time local Realtor must provide professional guidance. This is not the time to take the real estate advice of family, friends or other professionals. While your legal adviser or family member who lives in another state means well, real estate still remains local, particularly with our mercurial national market. The sale of the marital home is not an isolated decision. There are short and long term financial, emotional and tax consequences. A Realtor, preferably one who specializes in divorce, can offer the best guidance regarding the marital home. They must understand that they will work in tandem with other professionals for the best customized outcome. The goal should be a client that has their individual needs met and is making informed decisions from a knowledgeable place. This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Not a commitment to lend. Copyright 2016 All Rights Divorce Lending Association, LLC The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.