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The reverse mortgage: In some divorce scenarios, it makes sense

Many people in Georgia and nationally might have a preliminary question regarding a reverse mortgage prior to deciding whether it might be a relevant consideration in a family law matter.

That question: What is it?

That is certainly an inquiry worth addressing for some divorced persons or for persons either involved in the divorce process or contemplating a marital dissolution. As has been noted by some commentators, it is especially important for older persons -- those nearing retirement or already enjoying it -- who have equity in their homes.

A reverse mortgage is a legal agreement entered into with a lender, typically a bank, pursuant to which the home serves as collateral for a loan made to the debtor. It is called a “reverse mortgage” because the money flows in a direction that is opposite to what normally occurs with a mortgage. That is, payments go from the lender to the homeowner.

A reverse mortgage is certainly not for everybody, but it can make sense for a small population of people, especially those with substantial home equity that can be freed up through a reverse mortgage and used in lieu of other assets for tax-savings purposes. Additionally, such a mortgage might simply provide income for a party who lacks resources elsewhere.

The mortgage is typically associated with older people, given that it usually takes a number of years to gain sizable equity in a home. A reverse mortgage ends -- that is, the loan and any interest becomes due -- when a homeowner dies, moves or sells the property, or in the event that outlays for insurance and taxes are not being paid. The home is usually sold in the process.

Whether a reverse mortgage makes sense in a given case is a highly case-specific inquiry requiring careful examination of all relevant factors. A proven divorce attorney who has assisted clients with reverse mortgages can be an invaluable source of information.

Source: Forbes, "How reverse mortgages can benefit older divorcing women," Jeff Landers, Sept. 24, 2013

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