Divorce and your Mortgage
September 21, 2018 | Posted by: Mortgages By Marbelle
The General Issue
A mortgage is a financial obligation. From a mortgage lender's point of view, before anyone heads out to buy another property, they want the parties to the existing mortgage to properly deal with that one first.
Keep in mind, as long as your name is on the mortgage, you are financially liable for the debt even if you no longer occupy or have anything to do with the property. Being financially liable will impact your ability to borrow (or not) in the future. So even if you or your partner are going to keep the home and agree to pay the mortgage, as long as the other's name remains on the mortgage, they too are responsible for the payments If the other party defaults (illness, job loss, revenge, etc.). There are numerous ways this could play out...
In Canada, we have a mortgage program that permits one party to buyout the other with as little as a 5% equity requirement. This means, for example, if there is 15% equity in the home, 10% can be extracted to pay out or settle the joint debts and obligations of the relationship.
'Equity is the difference between the mortgage balance and the current market value of the home, per a licensed appraiser.'
- The program applies to a mortgage held jointly with your spouse or any immediate family member(brother, sister, parent, etc.)
- Requires an Offer to Purchase, a Separation Agreement, and an Appraisal (to be ordered by your mortgage professional.)
- Home must remain owner-occupied by one of you (cannot become a rental.)
- Person to remain on title and mortgage must still be able to qualify and to carry the mortgage in their own name (which means enough income and a good credit rating.)
If you are in a similar situation, please reach out, at Marbella Financial we can help you through the process.
Options for Getting Out of a Joint Mortgage
- One stays, one goes, no cash required
- One stays, one goes, cash is required
- No Equity, Can't Sell or Refinance