You might be going through, or considering, a separation or divorce but the end of a relationship does not necessarily mean that you will have to sell your home. Your home may be able to give both partners a new start.
For many, their home is their largest asset and where most of their net worth has accumulated. There are mortgage products available that can allow you to buy out the other party while enabling you to stay in your home. A divorce or separation doesn’t always mean you will have to sell your property.
You will require a finalized separation or divorce agreement, as that is required by the lender and the agreement needs to clearly detail the asset allocation and any joint debts that need to be cleared.
The mortgage funds can only be used to buyout the other party’s equity the home unless it is clearly laid out in the separation agreement that some joint debts need to be paid out to a maximum of 95% of the value of the property. The property must be your primary residence.
Sometimes friends or siblings have bought a home and live together in the property. This program may be used in that circumstance also, but this will require an exception for an approval by the mortgage insurer.
There are insured mortgage programs available that could help you stay in your home in the event of a separation, divorce or dissolution of a relationship by purchasing the home from your ex-spouse or partner for up to 95% of the home’s value.
To qualify for this program you must be able to afford the mortgage payment on your own along with your other liabilities. Not only must the lender approve your application but also a mortgage insurer. Both parties must also be on title on the home prior to the separation.
There are some differences between two of the programs.
With the first mortgage insurer, the funds can only be used for a spousal buy-out or the dissolution of a relationship. This could be friends, relatives, etc. There cannot be any matrimonial debts or pre-payment penalties or fees included in the new financing.
With the other mortgage insurer, the funds can only be used for a spousal buy-out and no other relationship breakdown but the new financing can include matrimonial debts if they are listed on the separation or divorce agreement. They will also allow pre-payment penalties and fees to be included.
To qualify for both of these programs you must have good credit and earn sufficient income to support the mortgage payments.
It’s so important to seek the advice of a mortgage broker very early in the process, as they can guide you along the way to a successful separation so you can both have the best possible outcome going forward.
If you already have a separation agreement in place, they can show you how the value in your home can make it work out for you both.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.