If you happen to be going through, or considering a divorce or separation, you might not be aware that there are mortgage products designed to allow you to refinance your property in order to buyout your ex-spouse without having 20% equity.
For most couples, their property is their largest asset and where the majority of their equity has been saved. In the case of a separation, it is possible to structure a new mortgage that allows you to purchase the property from your ex-spouse for up to 95% of the property's value.
Alternatively, if your ex-spouse wants to keep the property, they can buy you out using the same program.
In a marital breakdown, lenders will look at the transaction as a new purchase, instead of a refinance, which allows for more flexibility. Here are some of the finer details about the program.
In order to qualify, you will be required to provide the lender with a copy of the signed separation agreement. The details of asset allocation must be clearly outlined.
The net proceeds can only be used to buy out the other owner's share of equity and/or to pay off joint debt as explicitly agreed upon in the finalized separation agreement. The proceeds can not be used for home renovations or to pay out individual debts.
The maximum equity that can be withdrawn is the amount agreed upon in the separation agreement to buy out the other owner’s share of property and/or to retire joint debts (if any), not to exceed 95% loan to value (LTV).
All parties to the transaction have to be current registered owners on title. Solicitor is required to do a search of title to confirm.
It is not necessary that the parties on the contract be married or common law, the current owners can be friends or siblings. This is considered on exception with insurer approval. In this case, as there won't be a separation agreement, there is a standard clause that can be included in the purchase contract that outlines the buyout.
A full appraisal of the property will be required.
If you have any questions about how a spousal buyout mortgage works, please get in touch anytime.
Be assured that our communication will be held in the strictest of confidence.
Questions on your mortgage, or want to compare your mortgage to what is currently available? Please email me danastauber@invis.ca.
