Illinois residents who are 62 years of age or older often take out reverse mortgages instead of home equity loans. A homeowner does not make payments on a these loans as long as the property remains their primary residence, and reverse mortgages, which are called home equity conversion mortgages when they are administered by the Federal Housing Administration, are usually paid off when the home is sold or the homeowner dies. A reverse mortgage can provide owners with a valuable and reliable source of monthly income, but interest will accrue and the amount needed to pay off the debt will increase every time they receive a payment.
Reverse mortgages in a divorce
When a divorcing couple owns a home with a reverse mortgage, they have a few options to choose from. The simplest solution is to sell the home, pay off the reverse mortgage and divide the proceeds, but this may not be acceptable to a spouse who wishes to remain in a home that they have developed an emotional attachment to. In a situation like this, the spouse who wishes to remain in the home can either take out a new reverse mortgage or refinance the existing reverse mortgage in their name only.
Reverse mortgages as a buyout option
Reverse mortgages are sometimes taken out by spouses who wish to remain in their homes but do not have the money to compensate their husbands or wives for the equity they are giving up. The proceeds from a reverse mortgage could also be used to pay for business interests in a divorce.
An attractive option
Taking out a reverse mortgage is often an attractive option in a divorce because no monthly payments are required until the property is sold or the homeowner dies or no longer uses the property as their primary residence. Interest will accrue until the reverse mortgage is paid off, but the money one of these loans provides could be of great help to a divorced spouse living on a fixed income.