Will a “Divorce Mortgage” Become a Reality in the U.S.?

With more senior couples divorcing, those who wish to keep the house may have the answer to their prayers provided it makes its way this side of the Atlantic: the “divorce mortgage.”

The concept is catching on in the U.K., according to an article in the British paper The Telegraph. As in the U.S., many senior couples in the U.K. are untying the knot, with 28% of them selling their home after the split, according to Nationwide. Another 13% have moved into a smaller house and 8% are now renting an apartment.

Although it is not a reality yet in the U.S., here is how a “divorce mortgage” works: banks would lend one of the divorced partners a lump-sum amount that would be enough to buy out their partner so the borrowing spouse can stay in their home. This would especially benefit those with children who want to keep some semblance of a normal family life.

The bank would also lend the divorcing spouse an extra amount of money that would be deposited in a savings account and used to pay the interest on this loan during the life of the loan. At the end of the loan period, the borrower could either sell the property, pay back the loan using the home equity or assume the duties of paying off the mortgage if their economic circumstances improved.

An opinion piece in Forbes said this would help U.S. couples who are divorcing later in life but are afraid of losing their house. The article also cited research from the National Center for Family Research at Bowling Green State University that the divorce rate among adults 50 and older doubled between 1990 and 2014.

The Forbes article goes on to mention the hardships a divorcing senior faces in keeping the home: rising homeowner’s insurance premiums, lower credit scores (thereby making it more difficult to obtain a loan), using retirement funds to pay for the house and lenders refusing to consider alimony as income until the partner has been receiving it on time for the past six months. Financial experts generally recommend selling the house and splitting the sales proceeds with the ex-spouse.

In a New Jersey divorce, the assets are divided by equitable distribution. While equitable distribution does not mean an equal division, the intended outcome is meant to be fair. In determining which party is permitted to remain in the home, if there are children living in the home, a court will also take the children’s needs into consideration, and which parent has physical custody of the child.

If you are going through a divorce, it is necessary to protect your assets. Speak with a skilled divorce attorney who can advise you regarding your legal rights. The attorneys at Hunziker, Jones & Sweeney have the experience necessary to provide clients with the best possible outcome for their situation. Call (973) 256-0456.

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