#51 Using a Reverse Mortgage to “Divide” Up the Most Indivisible of Assets
DIVVYING UP A HOME DURING DIVORCE? A REVERSE MORTGAGE OFFERS OPTIONS
The original plan had been of the “till-death-do-us-part” variety, yet here the two of you are, both well into your sixties, on the cusp of one of those amicable “gray divorces”. You’ve pretty much agreed on how to divide up the furniture, the office and sports equipment, as well as the joint cash and investment accounts. You each receive pension income and both of you will, in a year or two, qualify for social security benefits. What’s more, you both plan to continue running (at least for a while in your case) your respective home-based consulting practices.
The sticking point in the “master plan” appears to be the residence. While your home holds many memories for the two of you and for your now adult children, neither one of you feels willing, or even able, to shoulder the upkeep of this big a property simply in order to host the children and their offspring on holiday visits. Your spouse, in fact, is talking about moving out-of-state once the divorce is finalized. You, on the other hand, plan to reside within, or at least near, your current neighborhood.
There are two ways in which a reverse mortgage strategy might be of use to you in “divvying up the indivisible”. First, assuming neither of you plans to remain in the current home, list it for sale, then split the proceeds. Meanwhile, you apply for approval for a HECM for Purchase (Home Equity Conversion Mortgage) loan, which will be used towards a home or even a condominium of your choice. With a significant portion of the purchase price covered by the reverse mortgage, plus no monthly mortgage payments to make, a large portion of your share of the proceeds from your current home can go towards supporting your lifestyle going forward.
Should you decide, after all, that you’d prefer to spend your once-again-single future staying put, once the divorce is finalized, you might apply for a reverse mortgage on this home, relieving yourself of monthly mortgage payments while preserving the homestead for those visits from the kids and grandkids.
Divvying up a home during divorce? A reverse mortgage offers options!