What’s Next for your Home After a Separation?
Most people dream about living a fairytale with a wonderful partner and a life of bliss growing up. Unfortunately, real life is not always a fairytale, and not every relationship lasts forever. In fact, the latest divorce statistics show that 41 percent of all marriages in Canada end in divorce.
Separating, whether through divorce or ending a common-law relationship, is never an easy step. Losing someone close to you (whether for the better or not) is hard – but it doesn’t have to mean losing your home too. Depending on your agreement, most individuals going through a separation feel that they have to sell their home and split the equity, but there is another way.
Spousal buy-outs are one of the mortgage industry’s best-kept secrets, and we want to blow the lid on this great alternative! While not everyone will want to remain in their home, many individuals may opt to stay rooted – especially for those with children who are already enrolled in school and happy in their neighbourhood. This is where the Spousal Buy-Out Program comes in.
Backed by all three of Canada’s mortgage insurance providers (Canada Mortgage and Housing Corporation, Sagen™ and Canada Guaranty), this program allows one party to refinance the shared home up to 95 percent of its appraised value. In order to qualify, both you and your ex-partner must currently be on the deed to the property. As a one-time opportunity, you can use the Spousal Buy-Out Program to pay off other debts outside the separation agreement, further assisting with the transition.
Now you may be thinking, “I wish I could, but I can’t afford it”. Well, don’t sell yourself short just yet! We understand the cost of purchasing a home, whether outright or from your partner, can be high. Fortunately, the Spousal Buy-Out Program was designed to help YOU. It mitigates these costs by allowing individuals to bring on a cosigner, such as an existing family member or even a new partner, to assist.
If you are separating from your spouse or partner and would really like to hold onto your shared home, there are a few things you will need, including:
1. An Appraisal
You will need an appraisal report to determine the Equalization of Assets. However, in some cases, the appraisal may not be acceptable to a lender unless a third party originally ordered it. The appraisal must also have been produced within 90 days (less with some lenders) to ensure accuracy. If the original report is older than 90 days, you will have to get another one.
2. A Signed Separation Agreement
To qualify, you must provide a signed copy of the separation agreement. It helps to outline all of the details regarding the assets allocation first.
3. An Agreement of Purchase and Sale
You will require a standard agreement of sale that indicates the new ownership.
4. An Employment Letter or Recent Pay Stub
This is required so the lender can verify your ability to manage your mortgage payments.
5. Debt Payout List
This is an optional one-time option for paying off additional debts outside of the separation agreement. You can only use the proceeds to buy out the other owner’s share of equity or pay off joint debt as explicitly noted in the signed separation agreement.
Moving on in life can often be difficult, but this program allows you to maintain some of your routine and security by ensuring you – and your children – can remain in the home you love.