How to use a Reverse Mortgage in a Divorce Settlement

June 10, 2016 By Michael G. Branson 26 comments

You may have heard about the ways in which a reverse mortgage can help improve your financial situation by allowing you to withdraw the equity in your home over time.

For those people meeting the 62-year-old age requirement who have substantial equity in their homes, this can be a means to expand monthly cash flow or eliminate mortgage payments by paying off an existing mortgage through a federally-insured loan.

However, there is another important time when a reverse mortgage can be a helpful tool: in a divorce.

While taking charge of which spouse will keep which assets, a reverse mortgage may be able to relieve some of the financial burden on each spouse while allowing them to live separately.

Reverse mortgages and living separately

Many couples who separate later in life find themselves unable to support the costs of a home once supported by two partners now that they are independently responsible.

Here’s where a reverse mortgage can come into play…

The loan allows for you to choose how you withdraw the equity in the home, whether as a lump sum, a series of ongoing payments or a combination. If one spouse prefers to remain in the home but cannot meet the monthly mortgage payments, a reverse mortgage can be used to pay off the mortgage, with any remaining proceeds going to the moving spouse.

For example:

Say you have a $300,000 home with an $80,000 mortgage balance at age 72. You may be able to borrow a little more than $200,000, with $80,000 going to pay off the existing mortgage and the remaining $120,000 to be used however you choose. You can even wire the funds to the moving spouse at closing.

You will have to remove the moving spouse from the home title, which can take place during the course of the loan.

This will allow one spouse to keep the home, payment free, while the other can keep the remaining cash.

As with any reverse mortgage, the loan becomes due when the borrower moves from the home or passes away. He or she must continue to pay property taxes and homeowners insurance over the life of the loan.

Reverse Mortgage for Purchase

A relatively new type of reverse mortgage may also be a useful solution for a divorcing couple. If neither spouse wishes to remain in the home, a Reverse Mortgage Purchase loan allows a homeowner to purchase a new home while taking out a reverse mortgage in a single transaction. In the same way a standard reverse mortgage can help, this may enable one spouse to move to a new home through the reverse mortgage while the other can assume some of the remaining cash proceeds.

This might work particularly well in the case where the borrower is downsizing.

If you get divorced and already have a reverse mortgage…

In the case where a couple who has a reverse mortgage together decides to get a divorce, they must submit the divorce decree to the loan servicer. At that point, one of the spouses will be permitted to be removed from the home title, keeping the loan in the remaining spouse’s name.

The experts at All Reverse Mortgage® are here to answer your questions! If you are facing divorce and would like some help with the numbers give us a call Toll Free (800) 565-1722 or calculate your available reverse mortgage amount here.

PS – We also welcome and respond to comments below…

Recommended Reading…

How Will a Reverse Mortgage Impact my Kids and Family?

Outside resources:

HUD’s website for HECM loans

About the Author
Michael G. Branson

Michael G. Branson (CEO All Reverse Mortgage Inc. and moderator of ARLO™) has 40 years of experience in the mortgage banking industry and has devoted the past 14 years to reverse mortgages exclusively. Michael G. Branson was part of the team that introduced the first fixed-rate jumbo reverse mortgage to market, which was sold to a private investor in 2007. Mike can be reached at

Post Tags: Divorce separation spouse

26 Comments on “How to use a Reverse Mortgage in a Divorce Settlement”

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ARLO™November 13, 2018

James FNovember 13, 2018

I have a reverse mortgage in my name only, since my spouse was under 62 at the time. The reverse mortgage was taken in 2012. We are going through a divorce. When I leave the home, and notify the reverse mortgage company I am gone, how long can the spouse stay in the home?

Reply
- ARLO™November 13, 2018
  
  Michael G. BransonNovember 13, 2018
  
  Hello James,
  
  I'm sorry to hear of your circumstances but if you and your spouse plan accordingly, there should be plenty of time to act. Your spouse will be subject to the same requirements as any other reverse mortgage property on which the borrower no longer occupies the property as their primary residence.
  I assume that your spouse also has title to the property now or will by the time you leave the home? In that case, your spouse will have the option of refinancing the home with a new loan, selling the property or walking away if that is preferable. Since 2012 is just 6 years ago and most properties had not yet begun to appreciate from the market crash, the chances are very good that there has been appreciation since the time you obtained the loan and therefore, there is equity in the home now.
  Your spouse should determine what they want to do with the property and plan accordingly now. If now financing or a sale is the determined plan of action, your spouse can start even before the lender makes the initial contact and the lender will work with your spouse for up to 12 months with extensions to allow for the sale or financing to complete the action if progress is being made. I wish you both the best.
  
  Reply
ARLO™October 22, 2018

RebeccaOctober 22, 2018

My grandfather, upon his and my grandmothers divorce, put my brother and myself as the heirs to my grandmothers living estate.

She purposely stopped paying the loan on the home in Dec. My brother and I didn't even find out the home and property would be ours until we saw foreclosure papers.

Grandmother is very ill. So, nothing is being done. 22k owed. Would an investor buy me and my brothers share? Draw up papers and skip probate?

Reply
- ARLO™October 22, 2018
  
  Michael G. BransonOctober 22, 2018
  
  Hello Rebecca,
  
  You and your brother really should contact an attorney for this advice, and probably sooner rather than later if this is already in foreclosure. You have mentioned a number of terms here that I could not even begin to guess at what is really the full story and even then, I cannot advise you legally. You said your grandmothers living estate. Did your grandmother hold only a life estate to the property? If so, the title passes to someone else upon her passing and if that is you and your brother, you really should know what your rights are before it is too late.
  
  I'm also confused in that if she had a reverse mortgage, there were no payments on the loan. Is she still living in the home and was it the taxes she stopped paying? Is the title in the name of a trust with your grandmother having a life estate for as long as she lived? An attorney can tell you all of these things if you are not sure as well as who the title reverts to upon her passing. Until you know these things, I don't even know if you have anything marketable to sell to an investor and if the foreclosure cannot be resolved in the short term, there would be nothing left to sell after the home sold at foreclosure auction. My strong advise is to contact a real estate attorney as soon as you can to find out just exactly where you stand and what your rights and obligations are.
  
  Reply
ARLO™October 22, 2018

James F.October 22, 2018

I have a reverse mortgage in my name only, the deed is in my name only. I(we) took the reverse mortgage before my wife was 62. We are now looking at divorce. What rights does my spouse have to stay in the house after the divorce? Would the house have to be sold? Could she remain in the house? We were told her name could be added when she turned 62. When she did turned 62, we tried, but was told we would have to pay all the fees again, almost $8,000 dollars!!! Thank you!

Reply
- ARLO™October 22, 2018
  
  Michael G. BransonOctober 22, 2018
  
  Hi James,
  
  If you have it in writing from your previous lender that you can add another borrower to an existing loan when they turn 62, I would certainly suggest you confront them and ask them to pay the fees for the new loan because you simply cannot. You cannot just add another borrower to the loan once a loan has been closed. You can add your spouse to the title of the property which allows them to sell the home or get a new loan in their name as the property owner, but it does not allow them to be a borrower on the existing mortgage. If that were the case, there would be no reason to exclude them in the first place! After all, if you were just going to allow the borrower to be added to the loan later, why not just allow them to be on the loan from the start and call it a day?
  
  In fact, that's what HUD did in 2014 when they changed the rules for borrowers with spouses who were no yet 62 years of age. However, they also took that second spouse's age into consideration when they determined the loan amount and borrowers with spouses under the age of 62 received a lot less money on the loan due to the fact that a younger spouse could conceivably live longer and accrue more interest in a life time. Be that as it may, borrowers who received their loans prior to the change, and who now do not have their spouse as an eligible non-borrowing spouse, must refinance the loan to add the spouse at a later date if that is what they wish to do. Your options are to refinance the loan with either a forward or traditional mortgage, with a new reverse mortgage or you can always sell the home if that is your preference. But unfortunately, you cannot just add someone who was not a borrower at the time the loan was closed to an existing reverse mortgage loan.
  
  I would strongly recommend that anyone who has been told they can just be added later or thinks that is what they were told that they realize that this is not the case. Borrowers who received their loans after HUD changed their rules must realize there are stipulations to the non-borrowing spouse being able to stay in the home after the borrowing spouse leaves and they are fully spelled out in the loan documents. Even then, the remaining non-borrowing spouse does not have access to the loan, even if there were still funds available on the line of credit. I urge all borrowers and family members to fully understand what it means to be a non-borrowing spouse and make certain the terms work for you you and your circumstances.
  
  Reply
ARLO™October 1, 2018

NitaOctober 1, 2018

My husband and I have a HECM mortgage that we took out 2 years go. I am looking to get a divorce but do not want to change anything in regards to the home. I would like to leave it that my husband can reside in the home until he passes and then I would move back in.... Not asking to change the title in any way so that he can stay, pay all expenses associated with mortgage requirements and then when he passes I would take over. Would this void our mortgage as I would not be living in the house until he passes?

Reply
- ARLO™October 1, 2018
  
  Michael G. BransonOctober 1, 2018
  
  Hi Nita,
  If you are living in the home at the time the servicer receives notification that your husband has passed, you would meet the terms and there would be no problems with the loan. If you waited until sometime after the lender called the loan because they had received notification that the property was no longer occupied by either of you, that could cause you problems. I would suggest that you contact the servicer in advance to discuss your options in this matter. You are supposed to occupy the home as your primary residence and if you move out for a number of years then plan to move back, I don't know if they will consider that adequate to meet the occupancy requirement.
  
  Reply
ARLO™January 25, 2018

Janice GoodgerJanuary 25, 2018

My husband and I purchased our home with a reverse mortgage using his IRA money for the down payment. We have been in the house for almost 7 years. If we divorce and I leave, what happens the mortgage, my obligation to that mortgage and can I force him to sell the house?

Reply
- ARLO™January 25, 2018
  
  All Reverse MortgageJanuary 25, 2018
  
  Hello Janice,
  I'm sorry, but you are asking me legal questions that really do not pertain the to mortgage, but rather to the divorce laws in your state. I cannot give legal advice and would have to refer you to competent legal counsel for these questions.
  
  Reply
ARLO™January 21, 2018

Sylvia M.January 21, 2018

My husband has asked that I consider a reverse mortgage, however, we are in the process of a divorce. He wants to keep the house but has lousy credit and cannot obtain a regular loan to buy me out. What are the pros and cons to considering this process? If one spouse signs a quick deed are they still responsible for the loan even though there would be a decree to be held harmless in his obligation to loan company?

Reply
- ARLO™January 21, 2018
  
  All Reverse MortgageJanuary 21, 2018
  
  Hi Sylvia,
  
  There are several things to consider. Firstly, it is a felony to knowingly make a false statement in order to obtain a federally insured loan. If you get the loan and then subsequently get a divorce and move, there is no further liability as the loan is a non-recourse loan anyway (meaning the lender can only look to the property for security on the loan). However, if you secure the loan through false statements, there could be other repercussions and I would encourage you to seek legal counsel to determine your liability in that instance.
  
  A second thing to consider is if you do get the loan and then subsequently decide to divorce, you may not have any liability on the property, but your name is on the first loan and you would not be able to get a second reverse mortgage on another property if you were so inclined later. If you know you are leaving, it would be much better if your husband could get the loan on his own and then you would be eligible for a reverse mortgage of your own on another property if that was your desire. Things to consider.
  
  Reply
ARLO™October 19, 2017

NancyOctober 19, 2017

My husband and I have a Reverse Mortgage. I plan to leave him and give him the house. How will I go about getting my name off the Reverse Mortgage and the Title to the house? And once I do will that relieve me from all future responsibilities towards this house, thus property taxes, fire, whatever? Thank you.

Reply
- ARLO™October 19, 2017
  
  All Reverse MortgageOctober 19, 2017
  
  Hi Nancy,
  
  The reverse mortgage is a non-recourse loan and the lender and HUD have no other assets from which they can seek repayment other than the property. With regard to future responsibilities, you should consult an attorney to determine exactly what the divorce will absolve you of and what you need to do to make certain you are covered.
  
  Reply
ARLO™June 28, 2017

LeAnne V.June 28, 2017

My parents have a reverse mortgage for over 10 years. 5 years ago they divorced. my dad got the house in the divorce but my mom has continued to live in the house. recently my dad passed away. Both parents are on the reverse mortgage. What happens to the house and mortgage.

Reply
- ARLO™June 28, 2017
  
  All Reverse MortgageJune 28, 2017
  
  Hello LeAnne,
  
  I am not an attorney and cannot tell you what the ramifications for the property dissolution will be but the loan is still valid for the time being if mom is still on title. The reverse mortgage requires that at least one original borrower remain living in the home as his/her primary residence for the terms of loan to be met and your mom is an original borrower still living in the home. As long as she still has some title to the property, she can continue to live in the home per the terms of the mortgage for as long as she desires. That does not override any court decisions on the title though or subsequent changes.
  
  The devil will be in the legal details. Did they transfer the title solely to dad at the time of divorce? And if so, who does it go to upon dad's death (because if mom is not included, she is no longer on title)? Once the entire title is transferred from both original borrowers, then there is a due on sale clause in the documents that would be triggered and the loan would be due and payable. The question of ownership and right to occupy is one for the courts to decide and I cannot begin to express an opinion there. The courts could side with mom and give her the right to occupy but if the title has passed and none of the original borrowers are on title any longer, the loan could still become due and payable at this time.
  
  My advice would be to seek competent legal counsel to verify your rights and obligations so that mom is not left hanging at any time. The attorney can review the current title, the loan documents (particularly the Note as it contains the language regarding the due on sale provision) and the divorce paperwork to determine where mom stands with everything at this time.
  
  Reply
ARLO™June 3, 2017

GaryJune 3, 2017

My sister and her husband bought a home in 1976 in Las Vegas, Nv. They divorced in 1992. The divorce papers state that when my sister sold, she would be required to give her ex 1/3, my sister 1/3 and their 2 children split 1/3. My sister never sold it, never did a refi and paid off the home in 2006. She never intends to sell. Now she's fallen on hard times due to medical bills. She would to do a reverse mortgage, pay the ex and get a money monthly from a reverse mortgage. Ex will not reply with an answer to reverse mortgage. Home is worth approx $200k. There is one lien from sanitation district dated 1992. Is there anyway for her to obtain a reverse mortgage without ex's signature. I checked with county recorder, both names are still on there.

Reply
- ARLO™June 5, 2017
  
  All Reverse MortgageJune 5, 2017
  
  Hi Gary,
  A reverse mortgage is a loan just like any other loan with the only difference being the payments or lack thereof. If your sister would like to clear title to allow for other loans to be placed on the property, my suggestion would be to consult with an attorney or with the courts. As far as I know, that would be the only way to have someone removed from title.
  
  Reply
ARLO™December 11, 2016

BrianDecember 11, 2016

My parents (mother and step father) were divorced and then took out a reverse mortgage. My step father died then my mother. I payed off the reverse mortgage as I wanted to take possession of the house. My step siblings then said they want the money and are basing their share off of the total appraisal of the house and not the difference of what I paid to satisfy the reverse mortgage? What happens in this situation?

Reply
- ARLO™December 12, 2016
  
  All Reverse MortgageDecember 12, 2016
  
  Hi Brian,
  I'm sorry, this is a call for an attorney to advise you on and my take a court to ultimately make. The reverse mortgage has no bearing on this issue and I certainly cannot advise you in this area.
  
  Reply
ARLO™September 5, 2016

Ray D.September 5, 2016

What if my divorce was twenty-four years ago? I let my ex-wife and kids stay in the house, assuming that one day she or they would buy me out. Two of them have moved out. They all seem to think I owe her my half, though this is not what our final judgement said. So now I'm going to court to force the sale of the house. I would actually be happy to find a way to take out half the equity (which could be up to 400K) for myself, while enabling her to stay in the home. A good friend mentioned a reverse mortgage. If she is willing, how might a reverse mortgage work for us?

Reply
- ARLO™September 6, 2016
  
  Mike BransonSeptember 6, 2016
  
  If one of you were to remain on title and remain in the home, that individual can obtain a reverse mortgage on the property but the loan would not allow her to take $400,000 as a lump sum if there are no current liens on the home. HUD changed the payout options on the reverse mortgage a few years back and now borrowers can take up to their full benefit amount, or the Principal Limit, only if those funds are needs to pay off "mandatory obligations". Mandatory Obligations are bona fide liens and mortgages against the property that would need to be paid in full in order to obtain the reverse mortgage.
  
  This further make matters a little tougher in your case, those loans must have a seasoning of at least 12 months if the loan was used to take cash out of the property. In other words, your wife could not run out and obtain a short-term loan to pay you off and then use a reverse mortgage within a few months to retire that debt. The reverse mortgage could only be used to pay off an existing lien on which money had been extracted from the property if that lien was over 12 month's old.
  
  If your ex-spouse were to take a loan out today to pay you off, she could use the reverse mortgage after 12 months to retire the loan but the gamble that you must always keep in mind is that interest rates, potential HUD changes to the program and economic changes to property values, etc. could always affect her ability to obtain that loan later. If this is the path she chooses, she needs to make sure she has a "Plan B" in the even anything were to limit or remove her ability to qualify for the reverse mortgage later if she could not continue to make the required payments on the interim loan.
  
  Reply
ARLO™May 17, 2013

Jim McNairMay 17, 2013

My wife and I are getting a divorce Would like to know how the equity is handled. I put cash down she traded in her house as part of the down payment

Reply
- ARLO™May 29, 2013
  
  Mike BransonMay 29, 2013
  
  Hi Jim,
  I'm sorry, but this is not a question for us. The equity in the home still belongs to you and your wife. Whether you choose to sell the home as part of your arrangements or whether one of you will keep it or what, the equity is still yours. If you were to sell the home now, any equity in the property still belongs to you and your wife. Any arrangements to split the equity, determine payouts, etc. are completely separate from the reverse mortgage.
  
  Reply
ARLO™May 10, 2013

Mike BransonMay 10, 2013

Hello Kimo,

More than you would think. Today I quoted a reverse mortgage for a couple starting divorce proceedings on a home in southern California worth approx. $1.25M. Mr. would like to stay in the home and can cash out $430k cash to Mrs. Tax free. Mr. will be able to stay in the home for life without making any mortgage payments while Mrs plans to purchase a smaller home with cash from the reverse mortgage proceeds.

Reply
ARLO™November 8, 2012

Kimo JarrettNovember 8, 2012

How many divorces occur at age 72 or even beyond 62 with spouses that own their home or have equity? Not many reverse mortgage opportunities in my opinion and neither relevant based on any reliable data or am I mistaken?

Reply

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How to use a Reverse Mortgage in a Divorce Settlement

Reverse mortgages and living separately

Reverse Mortgage for Purchase

If you get divorced and already have a reverse mortgage…

About the Author
Michael G. Branson

26 Comments on “How to use a Reverse Mortgage in a Divorce Settlement”

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Who We Are

Learning Center

Reverse Calculator

Ask ARLO™

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Reverse mortgages and living separately

Reverse Mortgage for Purchase

If you get divorced and already have a reverse mortgage…

About the Author Michael G. Branson

26 Comments on “How to use a Reverse Mortgage in a Divorce Settlement”

Leave a Reply

Who We Are

Learning Center

Reverse Calculator

Ask ARLO™

ARLO™ Analysis

Our Blog

About the Author
Michael G. Branson