If you happen to be going through, or considering, a divorce or separation, there are a lot of things you need to think about. However, you might not be aware that there are mortgage products designed to support you. These products can allow you to refinance your property to buyout your ex-spouse.
Where do I start?
For most couples, your property is your largest asset. In addition, this is where the majority of your equity is saved. In the case of a separation, you can leverage a new mortgage to help simplify the process. This mortgage allows you to purchase the property from your ex-spouse for up to 95 per cent of the property’s value. Alternatively, if your ex wants to keep the property, they can buy you out using the same program.
Here are some common questions about the spousal buyout program:
Do I require a finalized separation agreement?
Yes, in order to qualify, you need to provide the lender with a copy of the signed separation agreement. In addition, you must clearly outline the details of all assets. It’s important to note that this should include the asset allocation.
Can I use the net proceeds 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. In addition, proceeds may be used to pay off joint debt as explicitly agreed in the finalized separation agreement.
What is the maximum withdrawal amount?
Your separation agreement will outline the maximum about of equity you are able to withdraw. This includes the other owner’s share of property and/or to retire joint debts (if any), not to exceed 95 per cent loan to value (LTV).
What is the maximum permitted LTV?
Maximum LTV is the lesser of 95 per cent or Remaining Mortgage + Equity required to buy out the other owner and/or pay off joint debt (which, in some cases, can total < 95 per cent LTV). However, the property must be the primary owner-occupied residence.
Who needs to be on title?
All parties to the transaction have to be current registered owners on title. However, a solicitor will need to do a search of title to confirm that all parties are on the title.
Do the parties have to be a married or common law couple?
No, the current owners can be friends or siblings. This is considered an exception and requires insurer approval. However, there is a standard clause included in the purchase contract that outlines the buyout.
Do I require a full appraisal?
Yes, when considering this type of a mortgage, it is similar to a private sale. You will need a physical appraisal of the property.
When going through a separation there is a lot you need to think about. However, it’s important to remember that there are financing products available to simplify the process. In addition, working with an unbiased mortgage broker can help simplify your life! If you have any questions about how a spousal buyout mortgage works, give me a call at (705) 333-4338 or get in touch with me here!