Is a Reverse Mortgage Right for Your Divorcing Homeowners?
Divorce has declined in the US for everyone except couples over the age of 50, whose rate has doubled since 1990.
Divorcing later in life is not a new phenomenon, but it is becoming more and more common. Indeed, the increased occurrence of “gray divorce,” as it’s called, has been identified as a significant 21st century divorce trend. Even though the overall divorce rate is actually declining, it’s on the rise among older generations.
Reverse mortgages were created specifically for senior homeowners, 62 years and older, who want to convert part of their home’s equity into loan proceeds. With not only the rising financial requirements of senior homeowners but when there is limited or fixed income in a divorce situation, reverse mortgages are becoming a popular option and tool to supplement income.
How can a reverse mortgage help your divorcing clients?
Flexible Payout Options can be a great...
Obtaining mortgage preapproval to purchase a new home has been common practice for many years. A preapproval shows the home seller that the buyer has the financial strength to obtain mortgage financing to successfully complete the purchase transaction. The mortgage purchase preapproval is one of the first steps required for homebuyers and it should be one of the first steps for a divorcing spouse before agreeing to refinance the marital home.
Equity Buyout Preapproval should also be required by the spouse retaining the marital home if new mortgage financing is required. A refinance due to a divorce is required to remove the vacating spouse from the current mortgage or when the in-spouse needs to buy the equity ownership from the out-spouse in cash form.
Have you ever given thought to the value of perspective that each member of the professional divorce team brings to the table?
Every divorce is different. Each having it's own set of assets, emotions and narrative. The strength and knowledge of each professional involved can have a major impact on the outcome.
Perspective is a way of regarding situations, facts, etc., and judging their relative importance. Perspective is the capacity to view or think about a situation or problem in a wise and reasonable way.
Certified Divorce Lending Professionals (CDLP™) have a completely different perspective when looking at a divorce settlement agreement and participating in the actual settlement or mediation process. CDLP™s don't just look at the divorce settlement agreement and how it applies to the borrowing spouse's mortgage application. They have a much wider viewpoint and understanding of the entire process - a deeper and stronger perspective of the overall impact divorce...
There is more to address in a divorce settlement agreement than just the disbursement of net proceeds or equity ownership in a divorce situation.
A mortgage escrow account is designed to hold a homeowner's periodic payments for real estate taxes, mortgage insurance, and possibly homeowner's insurance. Mortgage escrow accounts normally build up large balances at times because of the timing of payments made from them. Any excess mortgage escrow account balances must be properly accounted for and then refunded after homeowners sell their homes.
Mortgage escrow accounts accumulate money over several months, usually from borrowers' prorated payments for their real estate taxes. In most parts of the country, counties require property tax payments on a semi-annual or annual basis, meaning escrow accounts tend to build up until taxes are paid.
If the home is sold before tax and insurance payments are made, there will most likely be funds remaining in the escrow account. Lenders are required...
During a marriage, the financial identity of both spouses may become comingled due to joint bank accounts, joint credit cards, co-mortgagees, and more. Protecting yourself or your clients from financial identity theft during and after the divorce is final should be a top priority.
According to the Federal Trade Commission, identity theft falls into six major categories:
Real Estate, whether it is the marital home or investment property, is one of the greatest assets owned by married couples. Typically in a divorce situation, the property is sold or retained by one party, and ownership is transferred solely into their name.
When real estate property owned is sold, each party may be subject to capital gains tax. Depending on the value of the property at the time of the sale vs. the initial acquisition cost plus improvements, it may be wise to speak with a financial planner to weigh all options such as a 1031 exchange. (IRC Section 1031 – like-kind exchange)
Per IRS rules, a 1031 like-kind exchange provides an exception that allows you to postpone paying capital gains taxes if you reinvest the proceeds from the sale of an investment property (the “relinquished property”) into a similar property (the “replacement property”) as part of a qualifying like-kind exchange. The seller has 45 days to identify a...
The deed, decree, and debt all intersect during divorce yet all three need to be dealt with separately in the settlement process.
When transferring ownership of the marital home from jointly held ownership or from sole ownership to the other spouse, using the correct transfer deed is important for protecting the new sole owner. A Quit Claim deed is the most commonly used transfer deed yet, provides the least protection to the receiving spouse. Without warranties, it offers the grantee little or no recourse against the grantor if a problem with the title arises in the future.
A Warranty Deed may be a much better choice as it provides the most protection to the new owner. This type of deed guarantees that the grantor holds clear title to a piece of real estate and has a right to sell it to the grantee. The guarantee is not limited to the time the grantor owned the property as with a special warranty deed; rather, it extends back to the property’s earliest title. As...