What happens to your home, and mortgage, when you split up?
No one really wants to think about the possibility of divorce when you buy your home as a couple, but as we all know, it does happen. So what happens to your home, and your mortgage if the relationship comes to an end?
Typically, couples have a joint mortgage where both of their names are listed on the title of the home as well as the mortgage itself. This leaves you with a couple of options:
1. Sell the house, split the proceeds according to your agreement, and go your separate ways.
2. One person buys the other out, and the remaining spouse stays in the home and retains title* and a mortgage* to the property.
How do you know which is the right decision for you?
Well, the first option is significantly less complicated. You simply put your home up for sale, sell it, and split the proceeds according to a predetermined agreement, that you've both drafted and signed.
The other option depends on a variety of factors, especially if you face other difficult circumstances at this time, like if young children are involved and need to remain in the house, or the market is down and neither of you can afford to face the loss. Sometimes the second option is the only option.
If that’s the case and you’re going to be the one buying out the other half, you will have to refinance your mortgage using a single income. A good rule of thumb is to find out whether or not you can afford the new mortgage payments. Any lender will ask for proof that you are capable of paying the new mortgage payments even before you are able to apply for refinancing.
You will also need to negotiate and agree on an amount to buy your ex-partner out. If the equity in your home is sufficient, you may be able to withdraw it to pay out your existing spouse. If you do decide to go this route and refinance your mortgage post-separation, please contact me to help you navigate this, sometimes daunting, process.
Above all else, if you are facing a divorce or separation that will affect your mortgage – get informed first. It is difficult to know if you are making the right decision unless you discuss it with an experienced mortgage provider. I can help by informing you of your options and the necessary steps to proceed with obtaining a mortgage on your own, and ultimately help you find a solution that best fits your current financial situation.
Don’t hesitate to call me today if you need help or have questions about your mortgage 780-722-6287.
*OAC. Program subject to change and/or cancellation at any time