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A new approach to lending during a divorce

For many Texas spouses, having the ability to keep the family home is a top priority while divorcing. This is not always possible, however, due to the fact that the other party has a right to expect compensation for his or her share of interest in the property. If the retaining spouse is unable to buy out the other party, then the only course of action available to some is to sell the home and divide the proceeds as part of the divorce.

A solution may be found in a new loan product that is expected to debut in England. Known as a "divorce mortgage," this is a particular type of loan intended to allow borrowers to stay in their family home. The loan provides a lump sum that is used to pay off the departing spouse, and an additional amount is used to fund a special savings account from which the loan payments will be made for a specific period of time.

These types of loans would allow the borrower to walk away from the divorce with the family home. He or she would then have a predetermined period of time in which to secure financial stability. At that point, the borrower could choose to either sell the home and pay off the mortgage, refinance or take on the loan in full.

While this type of loan might not be a good fit for every Texas spouse who is facing a divorce, it could be just what is needed to some. A prime example is a spouse who has a marketable skill set, but who has set aside his or her career to support the needs of the family. Having a few years of time to reenter the workforce and establish a good salary can be all that is needed to move forward with financial stability. A divorce mortgage might provide the means to achieve those goals, while remaining in the family home.

Source: Forbes, "How The 'Divorce Mortgage' Could Help Older Homeowners", Richard Eisenberg, June 1, 2016

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