Understanding a Spousal Buyout Mortgage

If you’re going through or considering a divorce or separation,

you might not be aware that there are mortgage products

designed to allow you to refinance your property and buy out

your ex-spouse.


If you’re like most people, your property is your most

significant asset and is where most of your equity is tied up. If

this is the case, it’s possible to structure a new mortgage that

allows you to purchase the property from your ex-spouse for

up to 95% of the property’s value. Alternatively, if your ex-

spouse wants to keep the property, they can buy you out using

the same program.


It’s called the spousal buyout program. Here are some of the

common questions people have about the program.


Is a finalized separation agreement required?


Yes. To qualify, you’ll need to provide the lender with a copy of

the signed separation agreement, which clearly outlines asset

allocation.


Can the net proceeds be used for home renovations or pay off

loans?


No. The net proceeds can only buy out the other owner’s share

of equity and/or pay off joint debt as explicitly agreed upon in

the finalized separation agreement.


What is the maximum amount that you can access through

the program?


The maximum equity you can withdraw is the amount agreed

upon in the separation agreement to buy out the other owner’s

share of the property and/or retire joint debts (if any), not

exceeding 95% loan to value.


What is the maximum permitted loan to value?


The maximum loan to value is the lesser of 95% or the

remaining mortgage + the equity required to buy out other

owner and/or pay off joint debt (which, in some cases, can total

< 95% LTV. The property must be the primary owner-occupied

residence.


Do all parties have to be on title?


Yes. All parties to the transaction have to be current registered

owners on title. Your solicitor will be required to confirm this

with a title search.


Do the parties have to be a married or common-law couple?


No. Not only will the spousal buyout program support married

and common-law couples who are divorcing or separating, but

it’s also designed for friends or siblings who need an exit from a

mortgage. The lender can consider this on an exception basis

with insurer approval. In this case, as there won’t be a


separation agreement, a standard clause will need to be

included in the purchase contract to outline the buyout.


Is a full appraisal required?


Yes. When considering this type of mortgage, a physical

appraisal of the property is required as part of the necessary

documents to finalize the transaction.


While this is a good start to answering some of the questions

you might have about getting a mortgage to help you through a

marital breakdown, it’s certainly not comprehensive. When

you work with an independent mortgage professional, not only

do you get a choice between lenders and considerably more

mortgage options, but you get the unbiased mortgage advice to

ensure you understand all your options and get the right

mortgage for you.


Please connect anytime; it would be a pleasure to discuss your

needs directly and provide you with options to help you secure

the best mortgage financing available. Also, please be assured

that all communication will be held in the strictest of

confidence.

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