This week in Forbes online, Richard Eisenberg wrote an article about the “Divorce Mortgage”, a new financial product that is available in Europe and could potentially be coming to the United States. Please click here to view the article.
The idea behind the Divorce Mortgage is that it will allow a homeowner to borrow against the equity in the marital residence to buy out his or her spouse’s interest in the property and potentially borrow additional funds to pay the interest on the loan.
It is not infrequent that liquidity problems force parties to sell a residence that one of the parties would prefer to keep. However, there are currently several financial products and creative alternatives that can address liquidity issues. While new financial products may better solve some of these problems, with these new products it is increasingly important to evaluate whether the party wanting to keep the marital residence will be able to afford the residence after the divorce. Sometimes an absence of liquidity in a marital estate is a sign that there may not be sufficient resources to afford the residence after the divorce.
Jared B. Pinkus, Family Law Partner