Tif fany Hughes

D IVORCING YOUR MORTGAGE

March 2016 Issue

Kit Crowne

The Rise of the Grey Divorce

I S A R E V E R S E M O R T G A G E A N O P T I O N F O R Y O U R G R E Y D I V O R C E C L I E N T ?

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.

For baby boomers, divorce has almost become, like marriage, another rite of passage. The post-World War II generation is setting new records for divorce: Americans over 50 are twice as likely to get divorced as people of that age were 20 years ago.

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.

D I D Y O U K N O W ?

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.

Kit Crowne,

Loan Of f icer

Right T rac F inancial Group, Inc

Direct : 860.647.7701 x125 k i t@r ight t racfg.com NMLS ID 49595

Page 2 Andy Sikora , Cert i f ied Liabi l i ty Advisor Page 2 Andy Sikora , Cert i f ied Liabi l i ty Advisor Page 2

www.KitCrowne.com

Kit Crowne, Loan Off icer

Reverse Mortgage. The reverse mortgage for home pur-

chases is one of the most powerful 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 estimat-

ed 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 re-

verse 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 insur-

ance 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.

Reverse Mortgage as an Option…. Summary

Page 3 Kit Crowne, Loan Off icer

www.KitCrowne.com

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 program provides the widest ar ray 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 program lets you combine a lump sum, a credit line, 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!

W h y y o u N e e d a C e r t i f i e d D i v o r c e L e n d i n g P r o f e s s i o n a l ( C D L P ) o n Y o u r P r o f e s s i o n a l D i v o r c e T e a m .

A professional divorce team has a range of team players including the attorney, financial planner, accountant, appraiser, mediator and yes, a divorce lending professional. Every team member has a significant role ensuring the divorcing client is set to succeed post decree.

A Certified Divorce Lending Professional brings the financial knowledge and expertise of a solid understanding of the connection between Divorce and Family Law, IRS Tax Rules and mortgage financing strategies as they all relate to real estate and divorce. Having a CDLP® on your professional divorce team can provide you the benefit of:

A CDLP® is trained to recognize potential legal and tax implications with regards to mortgage

financing in divorce situations.

A CDLP® is skilled in specific mortgage guidelines as they pertain to divorcing

clients.

A CDLP® is able to identify potential concerns with support/maintenance

structures that may conflict with mortgage financing opportunities.

A CDLP® is able to recommend financing strategies helping divorcing clients identify

mortgage financing opportunities for retaining the marital home while helping to ensure the ability to achieve future financing for the departing spouse.

A CDLP® is qualified to work with divorce professionals in a collaborative setting.

A CDLP® can provide opportunities in restructuring a real estate portfolio to increase available

cash flow when needed.

A CDLP® maintains a commitment to remaining educated and up to date in the ever changing

industry guidelines and tax rules as they pertain to divorce situations.

A CDLP® is committed to providing a higher level of service to you and your

divorcing clients.

The role of the CDLP is to help not only the divorcing client but the attorney and financial planner

understand the opportunities available as well as the challenges divorce can bring to mortgage

financing during and after the divorce. When the CDLP is involved during the divorce process and

not after the fact, many potential financing struggles can be avoided with valuable and educated

input from the Certified Divorce Lending Professional.

“Nothing matters more in winning than getting the right people on the field. All the clever strategies and

advanced technologies in the world are nowhere near as effective without great people to put them to

work.” - Jack Welch, Winning

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. Interest rates and fees are

estimates provided for informational purposes only, and are subject to market changes. This is not a commitment to

lend. Rates change daily - call for current quotations.

Copyright 2015 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.

Kit Crowne, Loan Officer Right Trac Financial Group, Inc 110 Main Street,

Manchester, CT 06042

Direct 860.647.7701 x125

Kit@RightTracFG.com

www.KitCrowne.com

NMLS ID Personal 49595

NMLS ID Corporate 796583