Mortgage professional's take on considerations prior to divorce proceedings

by Ephraim Vecina22 Jun 2016
Along with adjustments on how much a property can be refinanced for, the CMHC also recently revised the guidelines governing couples who are facing the prospect of a divorce.
 
In an advice piece published on the company’s website, Dominion Lending Centres accredited professional Len Lane stated that the dissolution of a partnership in a home—whether the union is a marriage, a common-law relationship, or just two named owners—means that the property is now considered a sale.
 
“This means that the existing mortgage will most likely be paid out or in some cases one of the spouses can assume that mortgage and possibly increase the amount. Most likely it will mean that one spouse will purchase the home from the other,” Lane stated.
 
“Here’s the difference when we are in this situation: The home can be purchased with just 5% down payment again as it doesn’t fall under the refinance rule,” the mortgage professional said.
 
Other aspects to take into account are child support and Section 7 spousal support, as these often prove to be unexpected burdens for lenders.
 
“[Some lenders allow] to reduce the yearly incomes by the amount of child support. The biggest difference here is of course that the reduction allows you to qualify for more mortgage, it’s just a matter of knowing which lenders work the system which way and a skilled mortgage broker will know the difference,” Lane explained.
 
Lane added that any succeeding transactions and agreements need to be in writing, especially when documenting the exact portion of responsibility that each partner holds after the separation.
 
“So many in’s and out’s to be considered when embarking on dividing your households and of course we here at Dominion Lending Centres would always advise legal counsel first and then talk to your mortgage brokers about what is required for the mortgage process,” he concluded.

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Understand the cost before borrowing – mortgage professional
 

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