Negotiating a divorce settlement can be complicated when a reverse mortgage is involved. A financial expert, such as a certified public accountant (CPA) may work with you to come to a settlement that is fair for you both, or help you use a reverse mortgage to pay for your divorce.
What is a Reverse Mortgage?
A reverse mortgage is a type of loan that allows homeowners to withdraw equity from their homes. It can provide a steady stream of income to homeowners without the requirement of making monthly payments to repay the loan. Interest accumulates during the life of the loan.
Married couples may take out a reverse mortgage together or just one spouse can take the loan in their own name.
The loan is only repaid when:
- The house is sold.
- The house is no longer being used as the primary residence.
- The borrower dies.
How a Reverse Mortgage Factors in Divorce Proceedings When the Spouses Already Have a Reverse Mortgage
The division of the reverse mortgage is handled essentially the same as any asset or liability in the divorce settlement. There are three different solutions:
- Sell the home and use the proceeds to pay back the loan and divide any money left over.
- One spouse remains in the home but may need to pay the other spouse that spouse’s share of the equity of the home.
- If one spouse, who is not listed as a co-borrower for the reverse mortgage, wants to stay in the home, that spouse will need to pay a portion of the home equity to the other spouse.
Using a Reverse Mortgage to Pay for Obligations Created by the Divorce
If you want to stay in your home, but do not have the funds to buy out your spouse’s interest, you may be able to take a reverse mortgage for that purpose. There are eligibility requirements you must meet, but it can be done.
Heberger & Company Can Help
For more information about how a CPA can advise you about how to handle a reverse mortgage when negotiating your divorce settlement, contact us at Heberger & Company an Accountancy Corporation