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Q. Divorcing couple has two kids, $50,000 in bank, and a house with equity of $200,000 and remaining mortgage of $100,000. Woman wants to keep house "because of the kids" ;-) Man earns more than woman, however not enough - the child support and alimony is not sufficient to cover mortgage. Splitting of assets seems difficult. The man does not want to maintain any equity in the house after the divorce. Can the woman be asked to take out a home equity loan (reverse mortgage?) on the house equity of $200,000 to cover mortgage and similar expenses? The loan can be for 10 years by which time the kids should be grown. The loan will be such that the woman gets monthly checks for 10 years after which she will have to pay back the complete loan with interest (a balloon payment). Presumably, after 10 years, she will sell off the house and downsize to cover the loan payment. Assuming the woman keeps the house (I believe, the courts are likely to buy the "for the kids" rationale), is there any close-to-fair way to split the assets?

A. This is not financial advice of any kind. This is just my point of view as an individual homeowner. See a financial expert in your home state for a quialified opinion. Here are my thoughts from a distance. The monthly payments on a 10 year home equity loan are higher than on the same amount structureed into a 30 year mortgage. A large balloon on the end is a high risk. Many things can go wrong and the house may be lost at the end of the process. Meanwhile, if the woman is going to remain in the home, the home need to be completely refinanced anyways to get the man's name off of the loan (as well as off the title). The total mortgage should be less than 80% of value to avoid mortage insurance costs in addition to the loan, taxes and porperty insurance. So: Assuming that the division is 50/50: He gets $25,000 of the bank funds, she gets $25,000. (each needs it for emergencies.) House is refinanced in her name alone. She refinances at a $200,000 loan level, which is about 66% of equity if I read your numbers correctly. She owes him (by order of the decree and phrased in such a way that it is paid directly to him out of the loan escrow) the $100,000 additional equity taken out from the refinancing. The remaining equity (net of loans) in the home is an equivalent $100,000. To be fair, if the home were to be sold, agents' fees, excise tax and other selling costs would reduce the final cashout valueby 9% or 10%, so he may wish to be a fair guy and concede about $15,000 at the end and settle for $85,000, leaving her with only a $185,000 mortgage. This would give her about a $1,500 monthly payment when you make a guess about taxes, interest rates, etc. It would also leave her a lot of equity in case she needed to tap it for an emergency second mortgage.

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