Divorce is never easy—but when it happens later in life, the financial implications can be especially complex. In fact, this circumstance even has its own nickname: “gray divorce.” For couples aged 50 and older, divorce means more than the end of a relationship—it introduces significant financial changes that can have lasting impacts.
Whether amicable or contentious, divorce comes with costs that go far beyond legal fees. The need for a solid financial plan becomes essential—one that addresses shifts in income, division of assets, and adjustments to living arrangements.
In this article, we’ll explore how a reverse mortgage can serve as a valuable financial strategy for those navigating gray divorce, helping you access housing solutions, protect retirement savings, and move forward with confidence.
The Financial Challenges of Gray Divorce
Gray divorce introduces a unique set of financial hurdles for both parties due to the complex nature of splitting assets fairly. As retirement assets like 401(k)s, IRAs, pensions, and insurance policies are divided, each party is often left with fewer resources than originally planned—and women in particular often face disproportionate financial hardships.
A 2024 Prudential Financial survey found that on average, women have saved only about one-third of what men have saved for retirement.¹ This shakes out to a median of $157,000 for men, and only $50,000 for women. Another challenge that further contributes to women’s financial instability is receiving accurate information from the Social Security Administration. A whopping 82% of women received incorrect advice when inquiring about widow or divorcée benefits.2
Beyond retirement funds, another asset frequently emerges as the most emotionally and financially significant factor in divorce negotiations: the marital home.
When it comes time to address new living arrangements and how to proceed with the previously shared home, couples typically consider one of three main paths forward:
- Sell the Home and Split the Equity: This option can offer a clean break for each spouse. The home is sold and the proceeds are divided between both parties. If there are persisting disagreements about asset division, this option may emerge as the most straightforward path to proceed with. It removes ongoing financial entanglements but doesn’t always reflect each spouse’s emotional attachment to the home—particularly if children are involved or if the home holds deep sentimental value.
- One Spouse Stays in the Home: In this case, one spouse keeps the home by buying out the other’s share or offering equivalent assets. While this could provide much-needed stability, it may require refinancing the mortgage to remove the other spouse. And it’s no secret that qualifying for a new loan can be difficult—especially for those with lower or fixed incomes or those reentering the workforce post-divorce. Alternatively, the remaining spouse can utilize a reverse mortgage to buy out the other spouse’s share of the property, avoiding a traditional mortgage and protecting your retirement savings. More on this strategy in a moment!
- Shared Ownership of the Home: Another solution is for both parties to retain joint ownership, even if only one remains in the home. This approach delays selling the property until a more favorable time—whether due to interest rates, market conditions, or family needs. Shared ownership agreements can clearly define responsibilities for expenses like the mortgage, taxes, and upkeep, as well as specify how proceeds will be divided upon sale.
Leveraging Home Equity as a Solution
If you’re divorcing later in life, your family home is likely your largest asset—and your largest expense. In fact, it often makes up 50% or more of one’s total net worth.³ With traditional retirement income sources like Social Security and pensions often falling short, tapping into your home’s equity with a reverse mortgage can be a powerful way to ease financial strain for yourself and your spouse.
A Home Equity Conversion Mortgage (HECM), commonly referred to as a reverse mortgage, is a government-insured loan available to homeowners aged 62 or older. It allows you to convert a portion of your home equity into income tax-free cash,4 without selling the home or taking on monthly mortgage payments—so long as you continue to meet your loan obligations, such as paying property taxes, homeowners insurance, and maintaining the home.
If you have a higher-value property or are younger than 62, proprietary reverse mortgages, such as Longbridge Platinum, offer an alternative. Available to homeowners as young as 55,5 Platinum may offer you more proceeds and greater flexibility than a traditional HECM depending on your unique circumstances.
Flexible Options for Changing Needs
A major advantage of reverse mortgages is their flexibility, as they can be tailored to meet your individual goals. This can be a game-changer during a divorce where you may need alternative solutions to support your current or desired lifestyle. Depending on your needs and goals, you can opt to receive your reverse mortgage proceeds in a number of ways, including:
- A lump sum to help you buy out your spouse. By utilizing a large sum of money from a reverse mortgage to obtain complete ownership of your home, you can avoid needing to sell or dip into retirement savings or other assets earlier than planned. This option may be especially helpful if you’re facing a loss of income after separating.
- A line of credit for ongoing financial flexibility. If you’re staying in the home, a line of credit gives you easy access to cash. You can use it to cover day-to-day expenses now or handle unexpected costs later, like medical bills or home repairs.
- Monthly payments to supplement income. Choose monthly payouts—either for a set term or for life—to add financial stability. This option provides steady cash flow to help you cover expenses today and maintain your lifestyle in the future.
- A combination of these methods can also be beneficial—and with a reverse mortgage it’s possible! You can work with your loan officer to structure your loan according to your exact needs and circumstances.6
If you’re looking to start fresh, the Reverse for Purchase option offers another unique solution. This powerful option lets eligible borrowers buy a new home using a reverse mortgage. It’s not too good to be true: you can use a reverse mortgage to buy a home with no monthly mortgage payments.7 This can be a game-changer if you or your spouse are looking to relocate or downsize post-divorce, freeing up resources for other priorities like healthcare, travel, or retirement planning.
If you or someone you know is navigating a divorce and feeling the weight of financial uncertainty, Longbridge Financial is here to help. Our team of experienced professionals can walk you through your options and help you determine whether a reverse mortgage fits into your next chapter. As always, we recommend you discuss any potential impacts of a reverse mortgage on your unique financial situation with a trusted financial planner or divorce lawyer.
Contact our Longbridge team to learn how we can help you unlock the power of home equity—and find financial peace of mind during life’s transitions.
