When life hits us hard, it’s hard to move forward but we pull up our boots and take one step at a time. When couples decide that a divorce (or Break-up) is inevitable, if a house is involved, the question of whether the house has to be sold arises.
There are now mortgage products in place so that a spouse, who wants to keep a matrimonial home, can get a mortgage up to 95% of the value of the property in order to payout 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.
The rules for the 95% mortgage product are quite stringent. There must be a lawyer written signed Separation Agreement, an Agreement of Purchase and Sale between the parties, a full appraisal and the proceeds can only be used to payout the ex-spouse. With this product, CMHC, Genworth and Canada Guaranty, will not allow the funds to payout other debts. This fact should be kept in mind when the negotiations between parties is taking place.
Often, an appraisal 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 only acceptable for about 90 days (less with some lenders) so 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.
If the payout amounts require a mortgage for less than 80% of the value of the home, then the rules are less strict, although a separation agreement and appraisal will, in most cases, be required. With most lenders, other debts can be paid from mortgage proceeds with this product.
Including a Mortgage Broker or lender early in the Separation process can help ease you through this horrific experience.
Jenni MacDonald (www.jmacdonald.ca) is a Mortgage Broker with Dominion Lending Centres The Mortgage Source (Lic.#10145). She has over 5 years of experience in the Mortgage Industry and works with at least 40 lenders including banks, credit unions, and private lenders to find the best mortgage for each client. You can contact her by phone or text at 613-551-0639 or via email at firstname.lastname@example.org.