Mortgages During Divorce
In most cases, when clients marriage or common-law partnership is dissolved, the splitting of assets, debt and Real Property can be difficult to navigate.
It's important that as the separation agreement is negotiated, both parties spend time learning what is available to them for mortgage financing. Often, one spouse wants to purchase the other's equity in the Marital Home. There are specialized mortgage products to help clients navigate these situations.
When refinancing a typical mortgage, clients can only access up to 80% of the home’s value. But, through a Spousal Buyout Program, you can ‘purchase’ the home from your spouse and unlock up to 95% of its equity. Matrimonial debt and lump sum equity payments can also be included in the mortgage – up to 95% of the appraised value. This added access to funds often makes the difference between one spouse being able to buy out the other’s half of the home versus having to sell the home and find two new separate places to live.
The truth of the matter is that each client's situation is unique. Every situation requires a different mortgage and lending plan to match the assets and the desired split at separation It is our job to help you navigate this process. Connect with us to discuss solutions for your personal situation!
Spousal Buy-Out FAQ
Is a finalized separation agreement required?
Yes. In order to qualify, you will be required to provide the lender with a copy of the signed separation agreement. The details of asset allocation, child support and alimony payments must be clearly outlined.
Can the net proceeds be used for home renovations or to pay out loans?
No. The net proceeds can only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly agreed upon in the finalized separation agreement.
What is the maximum amount that can be withdrawn?
The maximum equity that can be withdrawn is the amount agreed upon in the separation agreement to buy out the other owner’s share of property and/or to retire joint debts (if any), not to exceed 95% of the value of the property.
What is the maximum permitted Loan to Value?
Maximum Loan to Value is the lesser of 95% or Remaining Mortgage + Equity required to buy out other owner and/or pay off joint debt (which, in some cases, can total < 95% LTV). The property must be the primary owner occupied residence.
Do all parties have to be on title?
Yes. All parties to the transaction have to be current registered owners on title. The solicitor is required to do a title search to confirm.
Do the parties have to be a married or common law couple?
No. The current owners can be friends or siblings. This is considered on exception with insurer approval. In this case, as there won't be a separation agreement, there is a standard clause that can be included in the purchase contract that outlines the buyout.
Is a full appraisal required?
Yes. When considering this type of a mortgage, it is similar to a private sale and a physical appraisal of the property is necessary. You should budget $350-$450 in appraisal fees.
