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Could a Reverse Mortgage Help Your Gray Divorce?

Posted on in Division of Property

Could a Reverse Mortgage Help Your Gray Divorce?It can be difficult to continue to make house mortgage payments on your own after your divorce. However, you may be able to keep your marital home for the foreseeable future if you are able to get a reverse mortgage on your house. Reverse mortgages are available to people who are at least 62 years old and have a large amount of equity in their home – usually at least 50 percent. You use the money you receive from a reverse mortgage to pay off the remainder of what you owe on your home mortgage, with the surplus available for other expenses. Gray divorcees should consider whether a reverse mortgage could help them during the division of property, though there are risks.

How It Works

Assuming that you qualify, you can apply for a reverse mortgage – also known as a Home Equity Conversion Mortgage – with lenders who specialize in this type of loan. The amount of money that you can borrow will increase in conjunction with your age and the value of the property. With a reverse mortgage, you no longer make mortgage payments on your home or payments on the loan as long as you remain in the house. The loan and interest are due when:

  • You die;
  • You decide to sell or leave the home;
  • The home is unoccupied for a stipulated amount of time; or
  • The lender forecloses on your home.

The lender recuperates the money from the reverse mortgage when selling the home. You cannot owe more on the loan than your property is worth, but the lender will protect its investment by requiring you to keep up with property taxes, home owner’s insurance, and maintenance of the property. Failing to meet these standards allows the lender to foreclose on the property.

Usefulness During Divorce

A reverse mortgage can enable one divorcing spouse to remain in the home without making mortgage payments while the other divorcee receives the money that remains after the home mortgage is paid. You can collect the surplus money as a:

  • Lump sum payment;
  • Series of payments; or
  • Line of credit.

If neither of you wants to keep the house after the divorce, you can apply for a reverse mortgage purchase loan that helps pay for your new homes.

Contact a Kane County Divorce Attorney

There can be detriments to getting a reverse mortgage, such as spending the equity you have built in the property. A St. Charles, Illinois, divorce attorney at Goostree Law Group can help you decide what to do with your marital home. Schedule a free consultation by calling 630-584-4800.

Source:

https://www.investopedia.com/mortgage/reverse-mortgage/

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