If you’re looking for a trusted, experienced, and knowledgeable Regina mortgage broker to help a first-time home buyer, I am here to help. No matter what stage you are in the mortgage process, I can assist you in securing financing to get the home of your dreams. I also understand that all those mortgage rules and regulations surrounding the process can be confusing. My team and I are here to answer all your mortgage questions and take you to home ownership. The subject of my latest article is what happens to your mortgage after a separation or divorce.
Separation, Divorce and Mortgages: What Happens to Your Home Loan After a Separation?
Separation is a challenging and emotional process, and one of the most significant financial concerns during a separation is the fate of the family home and mortgage. If you and your spouse/partner own property together, you must determine what happens to your home loan and how to navigate this transition smoothly. As an award-winning mortgage broker in Regina, Saskatchewan, I’ve helped many clients manage their mortgages during separation. Here’s what you need to know about your mortgage.
Assess Your Mortgage Situation
Before making any decisions, take stock of your current mortgage details, including:
- The remaining mortgage balance
- The interest rate and remaining term
- Who is on the title and mortgage agreement
- Your financial ability to continue payments independently
Understanding these details will help you determine the best course of action for handling the mortgage post-separation.
Options for Handling the Mortgage
Once you’ve assessed your situation, consider the following options:
One Partner Buys Out the Other
If one spouse wishes to keep the home, they may buy out the other’s share of the property. This typically involves a mortgage translation called a spousal buyout, where one person purchases the property from the couple (sounds funny, I know, but that’s how it works). This enables the purchaser to buy the house for up to 95% of the market value of the home, and sale proceeds can be used to pay out the existing mortgage and any equity buyout of the non-purchasing spouse. This option cannot be used to pay out any non-joint debts. The purchasing spouse must be able to qualify for the mortgage independently based on their income and creditworthiness.
Selling the Home
For many couples, selling the home and splitting the proceeds is the most practical solution. This allows both individuals to move forward financially without the burden of a shared mortgage. Before listing the home, agree on how the proceeds will be divided and ensure all debts related to the home are settled.
Co-owning the Home Temporarily
Some couples choose to continue co-owning the home for a period, particularly if children are involved. This arrangement allows stability, but it requires a clear legal agreement outlining responsibilities, mortgage payments, and a timeline for future sale or transfer. Continued co-ownership means that each individual will be legally liable for 100% of the costs of the home, and this may impede a subsequent home purchase while this arrangement is ongoing.
One Spouse Assumes the Mortgage (If Allowed)
In some cases, one spouse may be able to assume the existing mortgage without a new mortgage if they do not require any changes to the existing mortgage. However, this depends on the lender’s policies and whether the remaining spouse qualifies on their own.
Credit Considerations
Separation can have significant implications for your credit, particularly if both names remain on the mortgage. If your ex-spouse is responsible for payments but fails to make them, your credit score could be negatively impacted. To protect yourself:
- Remove your name from the mortgage if possible.
- Ensure all joint debts are settled.
- Monitor your credit report regularly.
Legal and Financial Advice
Navigating a mortgage after separation involves both financial and legal complexities. Consult a mortgage professional, financial advisor, and family lawyer to ensure you understand your rights and obligations. A mortgage expert can guide you on refinancing options, affordability, and qualification requirements.
Moving Forward After A Separation
Separation is a challenging life event, but with the right strategy and professional guidance, you can successfully transition to financial independence. If you’re in Regina or anywhere in Saskatchewan and need assistance with your mortgage during a separation, I’m here to help. Contact me today for expert advice tailored to your unique situation.
PLEASE NOTE:
Mortgage rules and lender policies change all the time. Because Ryan has access to many lenders and has specialized expertise in structuring mortgage applications, he can determine the optimal way to structure your application to maximize the utilization of things like employment income, self-employment income, Canada Child Benefit income, disability income, maternity leave, down payment sources, credit issues, debt ratios, etc. The choice of lenders, combined with his experience, can make the difference in qualifying and/or qualifying for the amount you want. It’s not just about the best rate; it’s about flexibility and choices.
