AFTER A SEPARATION – What is next for your home?

Separating, whether through divorce or ending a common law relationship, is never an easy step. If you find yourself in this situation, you are certainly not alone – latest statistics show that 38% of all marriages in Canada end in divorce. Losing your relationship does not mean that you need to lose your home as well. Most individuals who are going through a separation feel as though they are forced to sell their home and split the equity – but there is a solution.

A Spousal Buy-Out Program allows one partner to purchase the home from another. This is particularly beneficial when there are children involved and you want to provide as much stability as possible. 

Backed by all three of Canada’s default mortgage insurance providers (Canada Mortgage and Housing Corporation, Sagen™ and Canada Guaranty), this program is designed to allow one party to refinance the shared home up to 95% of its appraised value. In order to qualify, both you and your ex-partner must currently be on the title to the property. The Spousal Buy-Out Program can also be used to pay off any joint debts held and to pay out your partner’s share of the equity.

The person who is purchasing the home, of course, must be able to qualify for the mortgage – this is where I come in!  Fortunately, The Spousal Buy-Out Program was designed to help you and, if needed, it allows individuals to bring on a cosigner, such an existing family member or even a new partner, to assist with qualification.

If you are separating from your spouse or partner and want to hold onto your shared home, there are a few things to keep in mind:

1. A SIGNED SEPARATION AGREEMENT

To qualify, the lender must be provided a signed copy of the separation agreement. The details of asset allocation (including current equity in the home) must be clearly outlined, as well as how joint debts are to be divided.

2. AN AGREEMENT OF PURCHASE AND SALE

A standard purchase agreement will need to be signed indicating the party that is to purchase the home. Your Lawyer can assist you with this.

3. INCOME DOCUMENTATION

Standard income documentation will be required so that I can verify that you qualify for the mortgage amount required. If you need to bring on a co-signer, that person will also need to provide their documentation. Depending on the source of your income, the list will vary. 

4. CONFIRMATION OF DEBTS TO BE PAID

This is an optional one-time option for paying off any jointly held debts. The proceeds can only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly noted in the signed separation agreement.

5. AN APPRAISAL

An appraisal report will likely need to be obtained to determine available equity in the home. During the approval process, the lender will request that we order an appraisal (usually through a third party). You will be responsible for this cost but the report will only be made available to the lender. We can ask the Appraiser for a letter of transmittal; however, this is not always granted. 

5. CLOSING COSTS

Aside from the cost of the appraisal above, you will also incur costs associated with purchasing a home, such as lawyer fees and title insurance. These costs can vary on a case-by-case basis (and depending on location). You can estimate closing costs by taking a look at my mortgage app here: https://dlcapp.ca/app/jenni-jackson

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.