Reverse Mortgage and Divorcing Seniors

Oct 26, 2020

Reverse Mortgage and Divorcing Seniors

A reverse mortgage is a type of loan that allows homeowners to borrow money against the equity in their homes. Reverse mortgages enable homeowners to tap into a line of credit or receive from a lender a fixed monthly payment that can help them pay off debts, make upgrades to their property, manage large expenses, or supplement their retirement income.

Divorcing clients over the age of 62 may have the option of utilizing a Reverse Mortgage for an Equity Buyout and keeping the home. Not only may a Reverse Mortgage be a viable option for divorcing clients who want to remain in the marital home; it may be a wise financial planning decision as well. Taking a reverse mortgage can also have implications on the tax bill, and for configuring potential Social Security income. You may be able to limit the income tax exposure by using cash flow from a reverse mortgage, rather than taxable withdrawals from a 401(k) or other retirement investment, to pay off...

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I Can't Buy a New Home if I'm Still on the Marital Mortgage!

Oct 19, 2020

“I can’t buy a new home if I’m still on the marital mortgage!” is often the statement made by the spouse leaving the marital home. Unfortunately, this isn’t necessarily true.

In many divorce situations, the spouse retaining the marital home won’t qualify to refinance the current mortgage and the vacating spouse believes they can’t qualify to purchase a new home while remaining on the mortgage for the marital home.

This thought process seems rational; however, there are certain steps and verbiage to include in the divorce settlement agreement that can remove this obstacle. While many mortgage companies have their own guidelines or ‘overlays’ to investor underwriting guidelines, a Certified Divorce Lending Professional (CDLP) will know how to handle Court-Ordered Assignment of Debt and the correct verbiage needed in the divorce settlement agreement or separation agreement.

When a borrower has an outstanding debt that was assigned...

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Refinancing the Marital Home When You Don't Live There

Sep 27, 2020

Many times in a divorce situation, one of the parties may not be living in the marital home at the time of the divorce; however, is awarded the marital home through the divorce settlement agreement or perhaps one divorcing party is awarded an investment property that will now become their primary residence.

A borrower who is currently on title for the preceding 12 months does not have to also be living in the subject property and may qualify for a Limited Cash Out Refinance without a reduction in loan to value requirements as long as they can show:

  1. They have paid the mortgage for at least 12 months, or
  2. They can demonstrate a relationship with the current obligor (relative, domestic partner as an example) and can document they were awarded the property through divorce or legal separation.

This may open up an opportunity for divorcing homeowners who also own investment properties. When their intent is to occupy a previously held investment property post-divorce, they...

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