Creating Additional Income to Keep Your Marital Home In Divorce
You want to keep your marital home, but you don’t have sufficient income to refinance the mortgage into your own name. Fortunately, you’ll have some liquid assets post-divorce, but the problem is that most mortgage lenders evaluate your income, not your assets.
If your monthly income is not enough for you to qualify for a refinancing, we may be able to help you create some additional guaranteed* monthly income with our unique solution
Why Are So Many Divorcing People Unable to Keep Their Home Even When They Have the Assets?
As one of the largest assets in divorce, if not the largest, keeping the marital home can often be a major point of contention, especially when children are involved and continuity matters. But staying in the home will typically require refinancing the mortgage into only the name of the spouse keeping it, unless the mortgage is already solely in that spouse’s name. And qualifying for that mortgage independently is a different challenge than qualifying jointly, especially if you were a stay-at-home mom or dad or if your income is substantially less than your spouse’s.
Lenders look at your income, your debt, and the monthly payment you are being asked to carry, which would include your mortgage payments, real estate taxes, homeowner’s insurance, and HOA fees, if any. Except for certain more expensive loans, your total savings do not factor in either, unless structured in a specific way. If your monthly income is not sufficient relative to your monthly housing payments, the refinance does not happen.
Why does alimony or child support sometimes not count toward mortgage qualification?
Many lenders require each separate support payment to have been received consistently and on time for a minimum of six months prior to application and must continue for at least 36 months after closing, before counting them as qualifying income. If your support payments are new, if they are inconsistent or late, or if they are not expected to run long enough to satisfy the lender’s continuity requirements, they will not count in their analysis even if those support amounts are substantial.
How Can You Create Qualifying Monthly Income Using Assets You Will Have Post-Divorce?
Using a Single Premium Immediate Annuity, we can help you convert a portion of your liquid assets into an immediate, fixed monthly income stream that is contractually guaranteed by the issuing insurance company and begins within 30 days of purchase.
That income is yours. It does not depend on your ex-spouse’s employment, health, or willingness to cooperate. It does not move with markets. It is a fixed payment every month for the term you select, and it can often be documented in a way that satisfies mortgage lender income requirements. You only need to provide the mortgage lender with the annuity contract and show receipt of the first month’s payment. However, just like alimony and child support, those annuity payments must continue for at least 36 months after your mortgage loan closing.
Guarantees are subject to the claims-paying ability of the specific insurance company issuing the annuity.
What assets can be used to fund a Single Premium Immediate Annuity?
The following can generally be used to fund the annuity:
– Liquid non-retirement savings and brokerage accounts
– Cash or liquid investment assets received as part of a divorce settlement
-Proceeds from the sale of your share of marital property
-Retirement account assets (if you are age 59 1/2 or older)
If you are under 59 1/2, using retirement funds may trigger early withdrawal penalties and income taxes on the distribution, which can significantly reduce the net benefit.
We help you identify which assets make the most sense to use based on your specific situation.
What is a Single Premium Immediate Annuity and how does it work?
A Single Premium Immediate Annuity is an insurance product that converts a one-time, non-refundable lump sum payment into a stream of fixed monthly payments for a defined period. You pay the premium once. The insurance company begins sending monthly payments to you, typically within 30 days. The payment amount is set at the time of purchase and does not change for the life of the contract. There is no market exposure, no investment risk, and no performance dependency
How Does This Work In Practice? Here’s a Hypothetical Example:
As of April 2026, a 40-year-old female in Florida would need to make an up-front, nonrefundable payment of $100,000 (this amount can be larger or smaller depending on how much monthly income is needed) to get a guaranteed, fixed monthly payment of $1,849 for five years. In this example, she would receive a total of $110,940 over that 60-month period. Only the $10,940 interest portion is taxable. The remaining $100,000 is considered a return of premium and is not taxable. (For people over 59 ½ who are using pre-tax retirement funds, 100% of those monthly payments would be taxable.)
How Does Annuity Income Work in Mortgage Qualification?
Mortgage lenders evaluate your ability to repay based on documented, reliable monthly income. A guaranteed* annuity payment creates exactly that: a fixed, recurring, third-party-verified income stream with a contractual basis. We will help you determine how much additional income you might need to qualify for a refinancing or new mortgage and then actually arrange for the purchase of the proper annuity. There is no cost to you since our commission is paid by the insurance company.
Is This the Right Solution for Your Situation?
This approach works best when the following are true:
– You have sufficient liquid or eligible assets available to fund the annuity purchase
– You are not using all your liquid funds. Most financial advisors suggest that you maintain an emergency fund of at least 6 months worth of expenses.
– Your current monthly income is not sufficient to qualify for the refinancing
– Your mortgage lender has confirmed, or you have reason to believe, that income from the annuity would now enable you to qualify for your refinancing
– You are committed to keeping the home and you will still have enough funds and income to pay all home related expenses including repairs and maintenance and you will still have enough for all your other living expenses such as groceries, healthcare, etc.
This is not the right solution for everyone, and we will tell you honestly if the numbers do not work.
Does my divorce need to be in progress, or can I use this approach after the divorce is final?
This solution should be considered during the divorce negotiations when you are determining what to do with your marital home. If you decide you want to keep your home, you will need to have sufficient assets to 1) buy out your spouse’s share of the home’s equity and 2) purchase the annuity. You also need to make sure that you will have sufficient funds remaining for an emergency fund. If you are a recently divorced or long-divorced homeowner or prospective buyer with liquid assets but not enough monthly income to qualify for a mortgage, the same approach applies. We work with clients at every stage.
How the Process Works
Step 1: Review Your Numbers
We start by understanding your current situation, your income, your available assets, the mortgage amount you need to qualify for, and how much you will need to buy out your spouse’s share of the home’s equity.
We will also need to understand if you will be receiving or paying alimony and/or child support. Ideally, we can work with you and your divorce attorney to structure the best possible outcome for you. This allows us to determine whether an annuity income strategy is viable and, if so, what size purchase would be needed to close your income gap.
Step 2: Run the Illustrations
We pull annuity illustrations from multiple A-rated or better insurance carriers showing what monthly income a given premium would generate at current rates, for the term you need.
Step 3: Confirm With Your Lender
Fannie Mae, Freddie Mac, FHA, and other quasi-governmental agencies all provide guidelines for mortgage lenders which allow for the use of a Single Premium Immediate Annuity to qualify as income.
Step 4: Fund the Annuity and Document the Income
Once purchased, monthly payments typically begin within 30 days. The issuing insurance company will provide your annuity contract detailing these guaranteed* payments, and you’ll need to provide that contract along with proof that you have received the first monthly payment as part of your mortgage/refinancing application.
How Does Annuity Income Compare to Other Ways of Closing the Qualification Gap?
01
Can I just wait until I have enough employment history to qualify?
Returning to work is one path, but most lenders require employment income to be documented consistently for a defined period (usually 1 to 2 years) before counting it as qualifying income. For self-employed borrowers, that period is often two years. If you need to refinance on a specific timeline, which is often the case, waiting for employment history to build may not be a realistic option.
02
Why is alimony or child support sometimes not enough on its own?
Support payments can count toward mortgage income qualification, but lenders typically require each of them to have been received separately for a minimum of 6 months prior to application and to continue for a minimum of 36 months after the loan closes. If those conditions are not met, that support income will not count even if the monthly amounts are significant.
03
What is an asset depletion mortgage and why does an annuity sometimes work better?
Some mortgage lenders offer an asset depletion mortgage. These lenders will calculate your assets according to the types of assets you own.
For example, cash in a savings or checking account will typically count as 100% of value, but your stock portfolio may only count as 70% or less of its value, because stocks can easily decrease in value. For retirement accounts, it is mostly 50 to 75% of its value, depending on your age.
Then they add up all those amounts and divide by 360 (the number of months in a 30-year mortgage) to see the amount you might have available each month to pay the mortgage.
Every lender that offers an asset depletion mortgage makes their own rules, so the percentages can vary greatly. The big disadvantage of an asset depletion mortgage is that they are much more expensive than a conventional mortgage.
Converting assets into an annuity creates a guaranteed*, documentable, recurring fixed monthly payment that is generally treated more favorably in mortgage underwriting than raw asset balances sitting in an account. And using the Single Premium Immediate Annuity can help you qualify for the more favorable, less expensive conventional mortgage loan.
Frequently Asked Questions
If you are using after-tax non-retirement funds to purchase the Single Premium Immediate Annuity, only the interest portion of your monthly income is taxable and will need to be included as an interest payment on your tax return. The remaining portion of your monthly income is considered a return of premium and is not taxable. (For people over 59 1/2 who are using pre-tax retirement funds, 100% of those monthly payments would be taxable.) Mortgage lenders only consider gross income before taxes when calculating your qualified income, so they will only want to know what the annuity pays you each month.
Some annuity products offer cost of living adjustment riders that increase the monthly payment by a fixed percentage each year, but that will result in a lower monthly starting payment to reflect the additional costs to the insurance carrier. However, for our purposes we do not want a lower initial monthly payment. Since you only need to show that the income will continue for 36 months after your loan closes, we only use a short-term annuity of 4 or 5 years, and we want the larger monthly income for that period of time.
A Single Premium Immediate Annuity exchanges a lump-sum cash payment for a guaranteed income stream. Once purchased, the premium is generally not refundable or accessible as a lump sum. However, your monthly payment consists of two parts – a return of premium and an interest component. Here is a hypothetical example: as of April 2026, a 40-year-old female in Florida would need to make an up-front, nonrefundable payment of $100,000 to get a guaranteed, fixed monthly payment of $1,849 for five years. In this example, she would receive a total of $110,940 over that 60-month period. Only the $10,940 interest portion is taxable. The remaining $100,000 is considered a return of premium and is not taxable. So, she is getting back her $100,000 plus $10,940 in interest over that 5-year period.
Fannie Mae, Freddie Mac, FHA, and other quasi-governmental agencies all provide guidelines for mortgage lenders which allow for the use of a Single Premium Immediate Annuity to qualify as income. Of course, it is always best to confirm with your specific lender just in case before spending tens of thousands of dollars or more. We can help you understand what documentation a lender would typically need and what questions to ask.
Same product type, different purpose and different person funding it. On the insurance service page, a Single Premium Immediate Annuity is mentioned as an alternative settlement structure when the paying spouse cannot qualify for life insurance. On this page, the annuity is purchased by the receiving spouse using their own assets to create qualifying income for mortgage refinancing. The mechanics of the product are the same. The context and the goal are different.
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Need More Income to Keep Your Home? We Can Help.
If you want to stay in your marital home after divorce but your current income is not enough to qualify for a refinance on your own, we can help you evaluate whether creating guaranteed monthly income through an annuity is a viable solution for your situation. We work with divorcing and divorced clients in all 50 states. There is no obligation and no cost for an initial consultation.
Everything on this website is for information purposes only and does not constitute legal and/or tax advice. If you require legal advice, consult with an attorney licensed in your jurisdiction and/or other appropriate professionals. The opinions expressed herein are solely ours, and we are not attorneys.