Of Prime Interest: Mortgage advice for couples planning a divorce

Now, you are able to stay in your home by purchasing your house from you ex-spouse or partner.

  • Nov. 25, 2016 10:00 a.m.

When a couple decides to divorce, the financial assets they accumulated will get divided or divested, with the largest shared asset tending to be their home.

While many couples assume that the house must be sold in a divorce, that is not always the case.

A few years ago, we all used to be able to access 95 per cent of the equity in our homes.

While that limit was since changed to 80 per cent, in the event of a divorce, separation or dissolution of a partnership, you are able to stay in your home by purchasing your house from you ex-spouse or partner for up to 95 per cent of the existing value of the home.

With the spousal buyout program, it is possible to refinance the property to 95 per cent by way of one partner buying out the other with the equity in the home.

The two parties must both be on title and currently in the process of a separation where one will be keeping the property.

But how is the down payment created?

In the case of 95 per cent financing, the down payment is created from the existing equity.

As an example, let’s say the existing home is currently valued at $500,000. The new financing of 95 per cent equates to $475,000 and the existing $25,000 creates the down payment.

Any existing mortgage must be paid from the new mortgage funds. The excess can be used to pay out the partner, pay off debt or if 95 per cent is excessive assist you in figuring how much you will need.

A copy of the offer to purchase along with documents to confirm the sale price and the transfer of title will be a part of the transaction.

A full appraisal to determine the value is also required.

As these mortgages are high ratio (less than 20 per cent equity), it must be insured. If the mortgage was previously insured, it is quite possible you will only pay a small portion and to top up the existing premium.

In the case where the refinance is 80 per cent of the value of your home or lower, there would be no mortgage insurance requirement.

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