WHEN THE RELATIONSHIP ENDS, BUT YOU STILL HAVE A MORTGAGE
According to the Vanier Institute of the Family, the average marriage lasts about 13.7 years before a divorce. Going through a separation or divorce can be challenging legally and emotionally. There’s no easy way to say goodbye, especially when you share a home with the person you are saying goodbye to.
Many separating couples don’t know about spousal buyouts and how it can help make the process easier. Whether you’re divorcing or separating from your partner, or just thinking about it, these buyouts let one partner “buy out” the other person on the mortgage.
Most buyouts are between spouses or common-law partners, but some can be between friends or family who have bought a house together. This is why spousal buyouts are also referred to as “co-borrower buyouts.” Whatever your situation looks like, both parties must have the right information to move forward.
WHAT IS A SPOUSAL OR CO-BORROWER BUYOUT?
The buyout works by primarily refinancing your home up to 95% to buy out the other owner’s equity share and pay off joint debt. The stress of carrying debt can impact your mental health. The buyout allows both parties to alleviate any stress that their joint debt may be causing and start fresh. A buyout can also come in handy in situations where selling the property isn’t optimal.
MEETING WITH A MORTGAGE BROKER
For a spousal or co-borrower buyout to work, several qualifications need to be completed. When you’re ready to separate, it’s essential to speak with a mortgage broker right away about your options. A broker can help you to determine if you qualify for a buyout, and if not, what might work instead.
The first thing that needs to be done is for both parties to decide who will keep the property. This is a decision that can only be made by the two parties. If both partners can’t come to an agreement, a buyout won’t be possible. Other options, like selling the property, might work best in this situation.
The person buying out the other must make sure that they can afford to own the home. Both parties contribute income to shared expenses in many situations, but after a buyout, the buyer will need to pay for expenses such as mortgage payments by themselves.
If you have talked it over with your partner and amicably decided on who wants to keep the home and is financially able to do so, you’re ready for the next step: meeting buyout qualifications.
One thing to know is that all parties must be current registered owners on the title to qualify for a buyout. Another vital requirement to be eligible for a buyout is to have a finalized separation agreement. The agreement includes crucial information, like spousal or child support payments. The lender needs to see this agreement and make sure all net assets are allocated.
A buyout is like a private sale, and as such, it is necessary to have a full property appraisal. This appraisal is ordered at the time of the buyout approval, so don’t worry about getting it done ahead of time. If done ahead of time, it likely won’t be usable because your lender often has specific requirements and appraisers they want during this process.
THE END RESULT
In the end, the buyer will have the home, and the other owner can take the equity from the buyout to find a new place to call home.
If you are a divorcing or separating from a partner and are interested in learning more about options, including buyouts, reach out to our team at the Mortgage Group Inc. Our Calgary mortgage brokers are always happy to help you find the best solution.