Dealing with a mortgage after separation

So the reality of the world is that a large number of marriages end up in divorce. This is a hard enough time in anyone’s life so the lenders and the mortgage insurers have come up with a product that can help. It is the ability to refinance your matrimonial home up to 95% of its value to payout your ex their portion of the equity and perhaps even some of the debts you incurred together. This is a specialty product and there are certain things you must do. Let’s take a look shall we?

Step one – you must complete a legal separation agreement through a lawyer. Even if it is the most amicable split in the history of mankind, this has to be done. The reason for this is you want your rights protected fully. If you are the one staying in the house, you want to make sure that your ex has legally and irrevocably given up their rights to the home. If you are the one leaving, you want to make sure that your name is removed from the title so there is no question of you have any further obligation where it is concerned. There will be a cost associated with the legal separation agreement. How much? I would not dare to say but I would budget a bare minimum of $2,500. It is also important to keep in mind that legal matters often take more time than anticipated so don’t imagine you will be able to get this completed in a hurry. Make sure that you address any debts taken on during the marriage. These can be paid out from the proceeds of the new mortgage but only if they are listed.

Step two – order an appraisal. This has two reasons. The first is that you and your ex will be able to determine the true value of the home through an impartial third party. The second is that most lenders require it in this situation.

Step three – write up an offer to purchase. This one always catches people off guard. Why should you have to write up an offer to purchase on a property you already own? The answer is just this – the lenders require it. This legally binding document shows the agreed upon price and the final closing date to which both parties have agreed. This can be completed through your lawyer, with the help of a willing real estate professional or on your own with a form available online.

Step four – get a mortgage. You have likely been in contact with your mortgage professional before now but if not, then now is the time. You are going to have to provide:

• Separation agreement

• Appraisal

• Offer to purchase

• Letter of employment and pay stub

• Last two years Notice of Assessments or T4’s

• Any other required documentation

It is very important to note that you will incur new mortgage insurance premiums if you go right to 95% of the home’s value even if you had already done so on the same property. This is a brand new application with you as the sole borrower so a full new premium applies. This is how it could look:

Home value $300,000

5% equity $15,000

New mortgage for $285,000

Insurance premium $8,977.50

Total loan $293,977.50

So that is a product which can help you through a very challenging time.

Until next time!

Pam Pikkert is a mortgage broker with Dominion Lending Centre – Regional Mortgage Group in Red Deer.

Just Posted

Local filmmaker works on documentary featuring women farmers

Red Deer woman receives $50,000 grant from STORYHIVE to produce documentary

Red Deer Rebels lose to Edmonton Oil Kings 4-1 at home opener

General Manager and Coach Brent Sutter said team ‘played hard’

Thurber Raiders snatch season opener from the Lacombe Rams

Red Deer game saw 44-8 win for the Raiders

Snowfall warning in effect for Red Deer

Around 10 to 15 centimetres expected

Environment Canada confirms Ottawa area hit by two tornadoes Friday

At one point more than 200,000 hydro customers were blacked out

Trump drains oxygen from Trudeau foreign policy with PM, Freeland bound for UN

A lot has changed since the Liberals came to power in Canada in 2015

Coaches, players on Alberta university rugby team buckle up for the Broncos

16 people died when Humboldt Broncos bus collided with a semi-truck in rural Saskatchewan

The Vatican ‘owes God an apology,’ activist says in letter to Pope Francis

Letter came after a report on sexual abuse of more than 1,000 children in six Pennsylvania dioceses

Ottawa to name new ambassador for women, peace and security, Freeland says

Chrystia Freeland also confirmed Canada would spend about $25 million to fund number of initiatives

‘A little bright spot:’ Ottawa residents rescue dog trapped beneath rubble

Freelance journalist says rescue of a dog trapped under rubble was happy ending amid chaos in Ottawa

VIDEO: Inside an eerily empty mall in Canada

Only nine of 517 retail spaces are open for business as the grand opening postponed to next year

Tens of thousands without power following tornado in Ottawa region

Hydro Ottawa says more than 170,000 customers were without power early this morning

BALONEY METER: Do Liberal policies mean a typical family is $2,000 richer?

MPs took to Twitter to talk how ‘typical’ Canadian families have more money due to Liberal policies

Most Read