A reverse mortgage can be a gamechanger for clients facing 'grey divorce'

Couples who separate later in life face financial barriers – but HomeEquity Bank can help

A reverse mortgage can be a gamechanger for clients facing 'grey divorce'

This article was produced in partnership with HomeEquity Bank.

Though overall the divorce rate in Canada has been in a steady decline, “grey divorces” – defined as those among people over the age of 55 or who are retired – are on the rise. In 2021, there were 1,622,267 divorced individuals between the ages of 55- and 89 years old living in Canada.

These separations bring with them many financial barriers – but brokers are well-positioned to help clients meet these challenges by providing them with peace of mind and solid financial options.

The cost of a grey divorce

The longer a couple has been married, the greater their financial ties. From funding children’s education to saving for retirement, these former spouses have been making financial decisions as a unit for decades in some cases.

When such a long-standing financial union is broken, clients suddenly require cash flow for various new expenses. In bitterly contested separations, settlement amounts can go into the millions. In Canada, the average cost of a contested divorce is $14,000, but even an amicable divorce that avoids lengthy court negotiations rings in between $5,000 and $10,000 for separation formalities. A complex divorce that requires extensive legal proceedings can tally up to $20,000 for a few days, up to $35,000 for a five-day trial.

Then there are expenses associated with the management of assets and liabilities. Arrangements must be made for the custody and support of children who aren’t yet legal adults. If applicable, treatment of joint bank accounts, co-owned investments, vehicles, the sharing of retirement and social security benefits, the division or liquidation of property and other assets.

How can a CHIP Reverse Mortgage help?

The costs associated with grey divorce can be challenging, especially if a couple lives on a reduced income following retirement. But the good news is HomeEquity Bank has a financial tool to help homeowners 55+ during a difficult time: the CHIP Reverse Mortgage.

During their union, a former couple also steadily built equity in their primary residence. The CHIP Reverse Mortgage allows one of the spouses to tap into up to 55% of that equity to retain possession of the home. Suppose a client’s spouse agrees to come off the title upon executing a legally binding settlement agreement. In that case, the other spouse can use the tax-free proceeds of the reverse mortgage to buy out the other spouse and remain in the marital home. Meanwhile, the spouse who is bought out can use the proceeds of the settlement as a down payment for their own residence.

Because the money received from a reverse mortgage is a loan, it’s not added to a client’s taxable income, and it does not affect benefits such as Old Age Security (OAS). There are also no monthly mortgage payments to make, which frees up additional cash ­– when needed.

The CHIP Reverse Mortgage can be a game-changer for someone facing significant change in their “better” years. To learn more about how to help your client stay in the comfort of the home they love during a difficult time, personally and financially, reach out to a HomeEquity Bank BDM today.

HomeEquity Bank has been dedicated to providing Canadian homeowners 55+ with smart and simple solutions for enjoying the retirement they deserve - in the home they love, for over 35 years. It understands helping your clients is your top priority, and HomeEquity Bank is here to help make that happen with a range of products including CHIP Reverse Mortgage, CHIP Max, CHIP Open and Income Advantage.