EARLY IN THE PROCESS

Dividing assets and navigating this stressful process takes time. While still in the midst of sorting things out, remember to continue making existing mortgage payments. All parties on a mortgage and title are responsible for regular payments being made on time, even during a separation or divorce. This applies to other joint bills as well.

OPTIONS TO KEEP YOUR HOME

Typically when the family home is being kept by one party, that party will have to buy out their ex-spouse per a separation agreement or court order. If you plan to pursue this option, consider:

How much will you owe your ex-spouse to buy them out?

This must be outlined in your separation agreement or court order.

Will there be ongoing spousal and/or child support?

How much you may owe (or receive) as ongoing spousal and/or child support must be outlined in your separation agreement or court order. This must be taken into consideration when qualifying.

Where will you be sourcing the funds to buy them out? Perhaps:

• Savings or gifted funds from a family member
• In this case, you may be able to remove your spouse from the existing mortgage and title via a covenant change. Note, you will need to be able to qualify for the existing mortgage on your own or with a co-signer.
• Equity from the home
• This may be possible through:
• Spousal Buyout (treated as a purchase but only allows access to funds required to buyout the ex-spouse; any penalty, fees, or closing cost cannot be wrapped into the mortgage if not outlined in the separation agreement or court order)
• Refinance (allowing access to additional funds; any penalty, closing costs, or other debts can be wrapped into the mortgage if desired)
• Second Mortgage (allowing an existing first mortgage to be left in place)
• Note that all of these options require qualification without the ex-spouse. On a single income, this may be more challenging, so a co-signer may be required. See our Co-Signer Info Sheet on our website Resource page
  

REQUIRED DOCUMENTS

In addition to standard income qualifying documents, in cases of separation or divorce, lenders will require a finalized separation agreement or court order. This must outline division of assets, including the family home, and any support payments (or confirmation of no support). If support payments are being received and used as income to qualify, confirmation of deposits may be required

If using a spousal buyout program, lenders may also require a purchase contract prepared by a solicitor/notary.

If buying out your spouse with savings of gifted funds, lenders may require verification of these funds.

COSTS TO ANTICIPATE

• Legal Fees: whether refinancing, removing someone from title, or selling the home, there will be legal fees to keep in mind.

• Existing Mortgage Penalty: if breaking an existing mortgage term early (refinancing or selling), a penalty will be incurred. The existing mortgage lender will be able to provide a quote outlining what penalty and fees to expect

• REALTOR® Fees: if the family home will be sold.

• Property Transfer Tax: if purchasing a new home.

• Appraisal Costs: may be required by the lender to confirm value of home.
  

OPTIONS TO PURCHASE AFTER SEPARATION

Again, qualifying on a single income and at current rates is often more challenging and a co-signer may be required. See our Co-Signer Info Sheet on our website Resource page. Down payment funds may be sourced from:

• Spousal buyout/proceeds of sale of the family home
• Savings
• Gifted funds from family
• Possibly your RRSP under the Home Buyers’ Plan (confirm eligibility with your solicitor/notary)
• Note, if your principal place of residence is a home owned and occupied by a new spouse or common-law partner, you would not be eligible to make a HBP withdrawal.

More information on purchasing can be found in our First Home Buyers’ Info Sheet on our website Resource page.

Note, a separation agreement or court order will be required to confirm any child and/or spousal support payments.

FREQUENTLY ASKED QUESTIONS

What if I don’t have a separation agreement yet?

We can still take a look at preliminary numbers for you to give you a better sense of your options, using hypothetical figures for child/spousal support, however it’s important to be aware that lenders will not allow us to fund a new mortgage without a finalized separation agreement or court order.

What if I’m not on the mortgage or title for the family home?

In some cases, there are tools that can be used to prevent your spouse from taking action while your separation agreement or court order is being finalized. Reach out to your lawyer to discuss your options in these circumstances.

What if they aren’t cooperating?

Be aware that these proceedings often take more time to be finalized in cases where a separation is not amicable. Reach out to your lawyer to discuss your options if your ex-spouse is not cooperating.

What if my parents gifted us funds towards our purchase?

If there was no co-habitation agreement signed, this will need to be explicitly outlined in your separation agreement. Discuss with your lawyer.

When should I see a lawyer? How long will this process take?

As soon as possible. Even if a separation is amicable, and both parties have all of their ducks in a row, finalizing a separation agreement can still take at least a month.

What should I have ready when I go to see a lawyer?

Your lawyer will confirm this, but to streamline the process, they will likely request your income documents like tax returns upfront.