For most, the decision to proceed with a legal separation or divorce is full of uncertainty and anxiety. In addition to managing the often emotional and complicated legal process of dissolving a marriage, it’s concerning for most couples how a divorce will change their life. One of the most challenging parts of a divorce is untangling the finances and splitting up the assets. The family home is usually a difficult talking point as the mortgage is most often a joint one held by both parties. As a result, it’s common to liquidate any real estate assets and simply divide up the value of the home between the spouses. Even though this is common, it’s hardly a universal solution. There are a variety reasons couples want to keep their homes. In Canada, divorcing couples have options if one party wants to keep the matrimonial home.
First Thing You Should Do
Before considering your options keep in mind the following:
- Understand and protect your credit score. Check your credit report. Avoid making large purchases on your credit card, or changing your finances. This will negatively affect your credit score. Remain diligent on making payments on any financial obligations with your name on them. It will be a much more difficult process if there are any negative marks on your credit score.
- Have a discussion with your ex on who is responsible for what debts and assets and if these need to be paid off. It’s important to know where you stand financially moving forward.
- Separate joint account quickly. Make sure no accounts have been missed by using your credit score. Debt needs to be paid off a revolving account like a credit card before the account can be closed.
Now that these are completed, you are well-prepared to proceed onto reviewing your options. If keeping your home is still something you wish to do. Simply put, either you or your former spouse has the potential to buyout the others equity in the home. We call this a Spousal Buyout.
Compensate your spouse for their portion of the shared equity in your home one of these two ways:
Assuming the Mortgage
You take 100% financial responsibility for making the mortgage payments. Your spouse is freed from any financial liability for the property. An assumption agreement will be required should you decide to take this route. You won’t be able to access any equity for a lump sum payment to your ex. Most Canadian lenders require additional documentation, to ensure the monthly payments are affordable. Not all mortgages are assumable, so this option isn’t available to everyone. Contact your lender to confirm the type of mortgage you have. If you allow your spouse to assume your mortgage, this does not relieve you of the financial obligation. Even if the mortgage the mortgage goes into default regardless of whether you are removed from the mortgage or not.
Refinance The Mortgage
If you do not wish to assume the terms of your current, joint mortgage you can refinance your mortgage instead. This option gives you more flexibility as it could involve you buying out your former spouse’s equity and paying out any matrimonial debt. You could also possibly obtain a better mortgage rate and lower your payments. Work with an experienced mortgage expert to make sure all necessary forms are completed.
Divorce is neither simple nor easy. With the right guidance from industry experts like me, stability, security, and peace of mind can eventually be achieved. Your divorce mortgage specialist has assembled a Spousal Buyout Program. This successfully guides Canadian homeowners with a dissolved relationship (this includes common-law spouses)
Let’s discuss your eligibility for the Spousal Buyout program (780) 946-6222.