Divorces are often messy, painful and complicated. Then you have to add on the extra stress of deciding who owns what.
One of the most complicated issues when going through a divorce or separation is dealing with joint debt, and more specifically, your mortgage. When getting a divorce, couples aren’t only dividing assets, but they’re also splitting up liabilities.
Your mortgage is typically your most significant liability. It has to be managed fairly, and your conflicts and emotions have to be put aside.
Let’s take a look at how to handle your mortgage during a divorce.
What is the value of your home?
Before you decide what you will do with your home, you and your partner must calculate the value of the home. Since your house is most likely your largest asset, it makes it a little more challenging to divide.
Here are 3 options to consider:
- Hiring an appraiser is usually the first thought, but not necessary at this point. They most likely will be part of the process later on depending on which direction you end up choosing. For now, you can save that cost, and if one is required later it will need to be ordered by the broker from one of the banks approved appraisers.
- Using a realtor to give you a detailed evaluation of your home and its overall worth is another common option.
- The Mortgage Station has access to a few industry property evaluation tools to provide you with a report on your home, at no cost.
The most important part is to get the process started. Once you know how much your house is worth, deduct the outstanding balance you owe on your mortgage. This will provide you with the current estimated amount of equity you have in your home.
You can use our mortgage calculator to calculate your new mortgage payments for free!
Great, now you have a full understanding of your homes value and the amount of equity you have to work with.
Here are some options you can take when dealing with your mortgage during a divorce:
Sell Your House
Selling your home is what many feel is their only option as tensions are high and money may be tight. After all, it probably took the two of you to qualify for the mortgage, how could just one of you continue on their own? If there are children involved, it gets more complicated, with friends, neighbours, and staying in the same school is so important. The goal is usually to maintain continuity for the children.
Before making the decision to sell, make sure you consider all your options.
In some scenarios, the couple will have to sell their home, pay off their mortgage, and try to move on, and have a fresh start with their own lives.
It’s essential to keep in mind that you want to give yourself enough time to sell your home properly. The last thing you want is to sell your home for less than what it is worth.
Some circumstances make these options a little more complicated. Our mortgage experts at The Mortgage Station can answer all your questions and help you get through this challenging and emotional time.
Refinancing your house with only one name on the mortgage is another option.
Some good news, there is a program designed for this purpose. It is called the “spousal buy-out program”, where one applicant that qualifies can take over the home in just their name. Lenders and insurers (like CMHC) support this program. To find out more, contact us!
Another option may be to consider an “alternative lender solution”. They are considered “alternative” because they have options for those who may have issues with credit, or income, etc. If there is significant equity in the home, there are options!
Once again, these options are not for everyone! Our specialists at The Mortgage Station can narrow down your choices and find the best fit for you.
Keep the House With Both Names On It
This option often comes as a last resort. If you and your partner are having trouble coming to an agreement and refinancing your home or selling isn’t feasible, then you must keep the house until a decision is made.
Keeping the home with both names on the mortgage could prevent one or the other from qualifying for another mortgage. This adds another financial burden on one’s shoulders because the couple will have to make monthly mortgage payments and continue with additional house-related costs.
If you are considering the possibility of breaking your mortgage contract, speak with one of our experts today to ensure you are fully educated on the process.
Some important things to keep in mind if you are considering a divorce:
- You must ensure you remain up to date on all your payments, even joint accounts and especially your mortgage payments. Have open conversations and communicate regularly to make sure this is happening for the benefit of both parties. Having your credit slip at this point may jeopardize the options available to you!
- Getting a separation agreement in writing, agreeable and signed by both parties, will be crucial in order to understand and qualify for any of the options, whether keeping, refinancing or selling the home.
TIP: This always takes longer than expected even in the simplest of situations.
Getting through a divorce is never easy and often a very unpleasant process. To ensure that you are treated fairly, contact our mortgage experts today, and we will go over all of your options, so you are in control of your own financial future.