Splitting Up: What happens with the mortgage

Splitting Up?

What happens with the

mortgage

Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // www.mortgagegirl.ca

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If you have financed a home with a

sibling, partner or spouse, common law or

married and have decided to part ways,

read on.

Based on my experience, the most

stressful issue in a relationship breakdown

is what to do about the jointly owned

home and mortgage.

Over the years I have helped many

borrowers navigate their way through this

process. For some, it meant one of them

could keep the home while for others, it

was best that the home be sold and all

parties move on to new adventures.

If you find yourself in this situation, I will

strongly advise this is one of those times

when you MUST consult an experienced

knowledgeable mortgage professional for

advice and direction. Jackie Woodward // Mortgage Broker, TMG

[email protected] // 780.433.8412 // www.mortgagegirl.ca

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I say this because I personally have

spoken with a number of recently

separating partners who were told

there was insufficient equity in the

home for one partner to “buy out”

the other and keep the home.

These people were working with

individuals who were not aware of

this fairly new financing solution

which allows one partner to

refinance the home up to 95% of

the current value as they thought

one could only refinance up to 80%

of the value because technically

you cannot purchase a property

you already own.Jackie Woodward // Mortgage Broker, TMG


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In order to be eligible for

this program (apart from

normal qualifying guidelines) you must

provide a legal separation agreement

which refers to the division of the equity as

well as a purchase agreement where the

equity is being “gifted”

to one partner from the

other.


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Now that you have determined

what you have to work with,

ensure you are doing all of the

right things with your finances

during this difficult emotional

time. Given you have made the

decision to separate, be sure to

keep your credit in check with

no missed or late payments

that could negatively affect

your credit score. If you are both bringing income

into the household, make sure

you are both aware of who pays

what payments.Jackie Woodward // Mortgage Broker, TMG


Splitting Up:

The Mortgage

Before you can agree on how to split up the assets

and debts accumulated during the relationship, start

with determining the value of the home which would

most likely be the largest asset and largest debt. This can be done with the help of a realtor or an

appraiser. Once you have the value on hand,

subtract the balance owing on the mortgage and you

now have the amount of “equity” in your home.

Depending on how you both decide to proceed with

the property, there may be other costs involved that

should be considered when determining the “net

equity” in your home. These costs may be realtor

fees, payout penalties or joint debts that you’ve

agreed to pay off.


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Whether one of you is

going to keep the property or you have

decided to sell, there

is some more information you should be aware of that should factor into

your decisions:

Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // [email protected]

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1. If you do decide to sell the

home to pay off the related

mortgage, the current real

estate market conditions

determines your selling price

and if you need to sell in a hurry,

you may not get as much for the

home as you originally expected.

Ensure you leave a bit of wiggle

room in case you can’t sell for as

much as you’d like.


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2. If one party refinances the home

under their own name, thereby

removing the other borrower from

the mortgage and title, the

individual keeping the home must

qualify to carry the mortgage debt

on their own. Good idea to speak

to the mortgage professional

sooner than later to determine if

this option is even available before

you get into negotiations involving

the lawyer.


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3. The third and probably least

favorable option is keeping both

parties on the title and the

mortgage with one person

moving out. In this scenario,

BOTH parties will have to declare

100% of the mortgage payment

and other house related costs on

any and all applications for future

borrowings regardless of whether

you live or don’t live in the home.


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If you’re just doing some

preliminary research for

now, again, do make it a

priority to contact your

favorite mortgage professional as it doesn’t

take long to run some

numbers in order to determine if a certain

scenario is do-able for

you before you start the

separation process.


mailto:[email protected]

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These points should just

act as a conversation

starter with your mortgage professional.

Your situation is unique,

and so is your solution.

It’s important to have

an individualized consultation about your

specific financial needs

in order to determine an

effective plan of action.Jackie Woodward // Mortgage Broker, TMG

[email protected] // 780.433.8412 // [email protected]

Jackie Woodward

Mortgage Broker, TMG

Email: [email protected]

Phone: 780.433.8412

Visit: www.mortgagegirl.ca

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Economy & Finance

Splitting Up: What happens with the mortgage