Life can hit us hard and it’s hard to move forward. But, we pull up our boots and take one step at a time. When couples decide that divorce (or Breaking up) is inevitable if a house is involved, the question of whether the house has to be sold arises.
Spousal Buyout
You can apply for a mortgage product called a Spousal Buyout. This product allows a spouse, who wants to keep a matrimonial home, get a mortgage up to 95% of the value of the property in order to pay out an amount owing to the other. In the past, if both names were already on the deed and mortgage, the maximum one party could pull from the house was 80% of the value as a refinance.
Requirements for a Spousal Buyout Product
The rules for the 95% mortgage product are quite stringent. You will need:
- An appraisal. An appraisal report will already have been obtained in order to determine the Equalization of Assets during a divorce. Unfortunately, in most cases, the same appraisal is not acceptable to a lender unless it was originally ordered by a third party (such as a Mortgage Broker or lender or lawyer) for the dual purpose of Equalization of Assets and Financing. Also, an Appraisal Report is acceptable for 90 days (less with some lenders). If the appraisal was ordered early in the divorce proceedings, another one may be needed by the time the details are settled. If the value changes over that time, the negotiations between parties usually start again to determine payout amounts.
- A signed Separation Agreement, written by or signed by a lawyer. Some lenders will allow a Separation Agreement signed by just the parties so if this is your situation, a Mortgage Broker can send your file to the appropriate lender.
- An Agreement of Purchase and Sale between the parties.
- Proof of payout amounts. The proceeds can payout the ex-spouse. With this product, CMHC will not allow the funds to pay out other debts. Genworth and Canada Guaranty are more flexible in their requirements. Keeping these facts in mind is important when the negotiations between parties take place.
Including a Mortgage Broker early in the Separation process can help ease you through this horrific experience.
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To discuss your mortgage options or for more information, feel free to make an appointment or apply online at jmacdonald.ca.
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