Separation Mortgages
Separation and Divorce are much more common than one may think. What's even more common is that when a couple decides to separate, they are anxious and excited to get things finalized and move on with their lives.
One of the most common items that is overlooked in these situations is a legal separation agreement. If you are planning on getting a mortgage to purchase a home post separation, whether it be taking over the marital home or purchasing a different one, you'll need a fully executed separation agreement before a lender will approve you for a mortgage.
One of the most common items that is overlooked in these situations is a legal separation agreement. If you are planning on getting a mortgage to purchase a home post separation, whether it be taking over the marital home or purchasing a different one, you'll need a fully executed separation agreement before a lender will approve you for a mortgage.
Separation Agreement
A separation agreement is a written and signed document that outlines the terms and conditions of the separation. The process of getting a legal separation agreement in place can be a tedious one depending on the amount of assets to be divided, whether or not children are involved and, how quickly the two parties can come to terms.
A mortgage lender requires a fully executed separation agreement prior to funding the mortgage in order to know what your financial situation will look like post separation. If you'll be paying or receiving child or spousal support, that will need to be included in the mortgage application as it will affect the amount of mortgage you'll qualify for.
In addition to that, the lender needs to know what will happen with any outstanding debts accumulated between the two parties and whether or not any equalization payouts (buyouts) will be required to "make things fair" between the two parties. All of these items will be outlined in the separation agreement and will play a factor in how much mortgage the applicant qualifies for.
A mortgage lender requires a fully executed separation agreement prior to funding the mortgage in order to know what your financial situation will look like post separation. If you'll be paying or receiving child or spousal support, that will need to be included in the mortgage application as it will affect the amount of mortgage you'll qualify for.
In addition to that, the lender needs to know what will happen with any outstanding debts accumulated between the two parties and whether or not any equalization payouts (buyouts) will be required to "make things fair" between the two parties. All of these items will be outlined in the separation agreement and will play a factor in how much mortgage the applicant qualifies for.
Talk To Your Mortgage Specialist!
Before you finalize a separation agreement and/or make a decision on what to do with the family home, it is important that both parties consult with a mortgage specialist to review their options. As mentioned above, many people in these types of situations are in a rush to get things resolved and move on with their lives. However, in many cases, people will go through the entire separation process only to find out that they don't actually qualify for the mortgage amount they were hoping for.
A mortgage specialist will be able to review your situation and offer feedback on what options may be available to you. It is important to contact them early in the process to help ensure that the separation agreement is set up correctly and to help you avoid any mis-steps along the way.
A mortgage specialist will be able to review your situation and offer feedback on what options may be available to you. It is important to contact them early in the process to help ensure that the separation agreement is set up correctly and to help you avoid any mis-steps along the way.
Mortgage Options
There are many viable options if you need to get out of a mortgage due to separation or divorce. These options include:
A mortgage specialist will be able to help you review your situation and figure out which of the above options are the right fit. As mentioned above, make sure that you contact them early in the process to find out which options you qualify for and to ensure that your separation agreement is set up in such a way that it allows you to proceed forward with your plans when the time comes.
- Sell - The house is sold to pay out the mortgage (plus any penalties or fees) and any surplus is split according to an agreement between the two owners.
- Release of Covenant - This is where one owner keeps the property and the other releases it without requesting payment. The one owner now assumes the mortgage, after proving they are financially qualified to do so.
- Release and cash settlement - One owner would relinquish the property to the other, while requesting part of the home equity value. The sole owner is required to prove they can assume the mortgage and pay out the request value to the other party. This process is commonly completed by refinancing the current mortgage as it may free up enough funds to make the requested payment to the partner relinquishing the property.
- Keep the property for rent - A joint mortgage can be kept as is and turned into a rental property to accrue value. This is a viable option when the home has not been owned long enough to accumulate a significant value in home equity, and could not likely be sold to cover costs.
A mortgage specialist will be able to help you review your situation and figure out which of the above options are the right fit. As mentioned above, make sure that you contact them early in the process to find out which options you qualify for and to ensure that your separation agreement is set up in such a way that it allows you to proceed forward with your plans when the time comes.
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Castle Mortgage Group
100-1345 Waverley Street
Winnipeg, MB, Canada
R3T 5Y7
100-1345 Waverley Street
Winnipeg, MB, Canada
R3T 5Y7