Mortgages after divorce
 February 9 2016     Posted by Steve Bucher

Greetings

Tough topic today…one of the most difficult times for a couple is in in the separating of assets and in the search for new homes. When looking at mortgages after divorce, the starting place will always be your separation agreement. The separation agreement will spell out the division of assets, debt and describe any payments one spouse may make to another. The bank will want to see this settled as it will affect how much you can afford to spend on a new home.

A couple scenerios:

1) the buyout

Rather than sell the home, one partner may try to buy out the other. This requires a new mortgage with the ex-spouse removed from title. In order to achieve this, the buying spouse will need to refinance the current mortgage plus get enough extra to payout the ex-spouse. That means qualifying for a bigger mortgage than they started with.

2) keep the home together

Again, rather than selling the home, the partners stay on title and agree to pay the mortgage together until a later time when one spouse can buy out the other. This can lead to problems since the spouse living in the home will be responsible for upkeep, payments etc… but the spouse outside the home will be liable if they dont do a good job. Poor management will mean lower sale price or appraisal when it is time to finally address ownership.

3) sell and start again

This is probably the easiest route to home ownership after divorce. Each partner can pick a home that matches their needs and price range, and leave the past behind. The proceeds of the sale of the family home are split and usable to buy a new home. Sometimes, realtor fees, legal fees and other can erode the proceeds to the point that renting will be the wise route in the short term.

Tips

Pay all bills on time! It won’t matter who should be paying the bill if your credit tanks from late bill payments.
Collect your mail regularly and update any address changes! 1 missed bill can mean “no mortgage”
Consider separate credit cards and bank accounts to avoid misuse or even the appearance of misuse
For specifics on your situation, email me at steve.bucher@migroup.ca.