My Mortgage Blog

Real Estate and separation, an all too real part of life these days. The statistics for divorce aren't getting any better. The stats I saw recently quote 50% divorce rate for first marriages. 67% for second marriages. And the percentages continue up from there.

I have helped a number of clients settle their divorce. Either through the sale of a property, purchase of a new property or the buyout of the matrimonial home by one spouse. It's never easy to see a marriage end but helping clients through this process as quickly and painlessly as possible is the goal.

Trial Separation

First, if they are only at the trial separation stage, there is no division of property yet. I found this article very helpful in determining when and how we look at property in this process. "There are no legal implications to asset division when somebody moves out from the matrimonial home for a trial separation, but it definitely has a major financial impact on their budget."

Legal Separation

Once the separation becomes permanent, then couples should seek out independent legal advice. They need to start the process of division of assets and the legal separation agreement. Until they have a signed legal separation agreement, no action can be taken with the existing property, or purchase of new property.

"Couples should also have a plan if the mortgage is up for renewal during the trial separation period. It may be simpler to renew with the same financing institution than to embark on a renegotiation with a new institution during this difficult period." If life is limbo, perhaps a shorter term or a variable term would be the best option. This will help to decrease penalties in the event the property needs to be sold - either by spousal buyout, or on the market.

Lenders need a legal separation agreement to be fully signed prior to approving a spousal buyout. They need to determine how spousal and child support affects qualification. The same applies when one spouse is buying another home.

Another thing to take into consideration for qualification, whether a spousal buyout or another property, is income. If there is a spouse that is a stay-at-home parent, with no income outside of child and spousal support, the lender will typically only be able to use 30% of that income for qualification purposes. This can make is very difficult for this spouse to qualify for a mortgage.

Each file is unique though. If you have a friend, co-worker or client that is recently separated, introduce us, we will help. By explaining the process and exactly what they need to do to qualify for a mortgage, we make the process less stressful.

For more information on mortgages and divorce, check out this previous blog post.