HOME EQUITY MAKES PARTING MORE SWEET THAN SORROW
Several years after your spouse passed away, you remarried. Hoping to spend the rest of your lives together, your new spouse sold her condo and used the proceeds to completely renovate your home. As part of the process, the home was retitled in both of your names.
Now, with your marriage in the process of ending due to the decision of getting a divorce, you’re more determined than ever to hold onto the one asset that has been part of your life for half a century, your home. Fortunately, your spouse isn’t contesting that decision. She plans to move out of state to be closer to her daughter, and both of you are working to keep the divorce as amicable as possible. You gave it your best shot, but things simply didn’t work out.
The challenge is that most of your investment assets are held in an IRA rollover account, leaving you without enough readily available cash to buy out your spouse’s share of the home’s equity. In addition to the potential tax consequences of liquidating assets, you’ve spent decades carefully building and managing your portfolio with the help of trusted advisors. While you receive moderate pension and Social Security income, you’d prefer not to deplete your cash reserves or short-term investments.
In a situation like this, tapping into your home’s equity might prove to be the best source of funds for your divorce settlement. Once you can document that you are again the sole owner of the property, you may be eligible to obtain a reverse mortgage. The proceeds can then be used to fund the agreed-upon divorce settlement and compensate your former spouse for her investment in the home’s renovations.
Going forward, you would continue to pay property, not real estate taxes and insurance (on the newly appraised value of the home, of course), but there will be no monthly payment due. Any unused portion of your equity will be credited with non-taxable growth at the same rate as that being charged on borrowed funds.
Rather than drawing down your investment portfolio, you would be using a portion of your home’s equity to buy out your former spouse’s interest in the property—allowing you to remain in the home you’ve cherished for decades.
For more information, visit David Garrison’s Reverse Mortgage Resources.
https://mutualreverse.com/david-garrison
Please consult a tax advisor.
David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org
Equal Housing Lender