splitting up: what happens with the mortgage
DESCRIPTION
Divorce, splitting up, parting ways, etc. No matter what you call it, the mortgage has to be dealt with. Check out our quick presentation about what to expect when splitting up the mortgage.TRANSCRIPT
Splitting Up?
What happens with the
mortgage
Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // www.mortgagegirl.ca
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If you have financed a home with a
sibling, partner or spouse, common law or
married and have decided to part ways,
read on.
Based on my experience, the most
stressful issue in a relationship breakdown
is what to do about the jointly owned
home and mortgage.
Over the years I have helped many
borrowers navigate their way through this
process. For some, it meant one of them
could keep the home while for others, it
was best that the home be sold and all
parties move on to new adventures.
If you find yourself in this situation, I will
strongly advise this is one of those times
when you MUST consult an experienced
knowledgeable mortgage professional for
advice and direction. Jackie Woodward // Mortgage Broker, TMG
[email protected] // 780.433.8412 // www.mortgagegirl.ca
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I say this because I personally have
spoken with a number of recently
separating partners who were told
there was insufficient equity in the
home for one partner to “buy out”
the other and keep the home.
These people were working with
individuals who were not aware of
this fairly new financing solution
which allows one partner to
refinance the home up to 95% of
the current value as they thought
one could only refinance up to 80%
of the value because technically
you cannot purchase a property
you already own.Jackie Woodward // Mortgage Broker, TMG
[email protected] // 780.433.8412 // www.mortgagegirl.ca
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In order to be eligible for
this program (apart from
normal qualifying guidelines) you must
provide a legal separation agreement
which refers to the division of the equity as
well as a purchase agreement where the
equity is being “gifted”
to one partner from the
other.
Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // www.mortgagegirl.ca
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Now that you have determined
what you have to work with,
ensure you are doing all of the
right things with your finances
during this difficult emotional
time. Given you have made the
decision to separate, be sure to
keep your credit in check with
no missed or late payments
that could negatively affect
your credit score. If you are both bringing income
into the household, make sure
you are both aware of who pays
what payments.Jackie Woodward // Mortgage Broker, TMG
[email protected] // 780.433.8412 // www.mortgagegirl.ca
Splitting Up:
The Mortgage
Before you can agree on how to split up the assets
and debts accumulated during the relationship, start
with determining the value of the home which would
most likely be the largest asset and largest debt. This can be done with the help of a realtor or an
appraiser. Once you have the value on hand,
subtract the balance owing on the mortgage and you
now have the amount of “equity” in your home.
Depending on how you both decide to proceed with
the property, there may be other costs involved that
should be considered when determining the “net
equity” in your home. These costs may be realtor
fees, payout penalties or joint debts that you’ve
agreed to pay off.
Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // www.mortgagegirl.ca
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Whether one of you is
going to keep the property or you have
decided to sell, there
is some more information you should be aware of that should factor into
your decisions:
Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // [email protected]
Splittin
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1. If you do decide to sell the
home to pay off the related
mortgage, the current real
estate market conditions
determines your selling price
and if you need to sell in a hurry,
you may not get as much for the
home as you originally expected.
Ensure you leave a bit of wiggle
room in case you can’t sell for as
much as you’d like.
Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // [email protected]
Splittin
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2. If one party refinances the home
under their own name, thereby
removing the other borrower from
the mortgage and title, the
individual keeping the home must
qualify to carry the mortgage debt
on their own. Good idea to speak
to the mortgage professional
sooner than later to determine if
this option is even available before
you get into negotiations involving
the lawyer.
Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // [email protected]
Splittin
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3. The third and probably least
favorable option is keeping both
parties on the title and the
mortgage with one person
moving out. In this scenario,
BOTH parties will have to declare
100% of the mortgage payment
and other house related costs on
any and all applications for future
borrowings regardless of whether
you live or don’t live in the home.
Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // [email protected]
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If you’re just doing some
preliminary research for
now, again, do make it a
priority to contact your
favorite mortgage professional as it doesn’t
take long to run some
numbers in order to determine if a certain
scenario is do-able for
you before you start the
separation process.
Jackie Woodward // Mortgage Broker, [email protected] // 780.433.8412 // [email protected]
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These points should just
act as a conversation
starter with your mortgage professional.
Your situation is unique,
and so is your solution.
It’s important to have
an individualized consultation about your
specific financial needs
in order to determine an
effective plan of action.Jackie Woodward // Mortgage Broker, TMG
[email protected] // 780.433.8412 // [email protected]
Jackie Woodward
Mortgage Broker, TMG
Email: [email protected]
Phone: 780.433.8412
Visit: www.mortgagegirl.ca
Questions? Let’s Chat!