If you happen to be going through a separation or divorce it is important to know about mortgage options that give you the ability to refinance your home and buy out your ex-spouse.

Most of your equity is usually within your property, if this is the case in your situation, then you likely will be able to create a new mortgage that allows you to buy the property from your ex-spouse for up to 95% of the property’s value. On the flip side, your ex-spouse can use this same system to offer you a buyout. This is referred to as the spousal buyout program. Here are some of the most common questions people have when looking into this option.

Do you need a finalized separation agreement before utilizing this option?

Yes. In order to qualify you will have to prove to the lender that you have a legal separation agreement that clearly outlines all your finances and assets.

Can some of the proceeds be used to pay off existing loans or to take on home renovations?

No. The proceeds can only buy out the other owner’s portion of the equity and/or pay off your joint acquired debt which is finalized within your separation agreement.

Is there a maximum accessible amount using this program?

The maximum amount must not exceed 95% loan to value and must be in accordance with the separation agreement.

Is there a maximum LTV?

Yes. The maximum LTV is the lesser of 95% or the mortgage amount remaining plus the amount needed to buyout the other owner including paying off joint debts which can sometimes total <95% LTV. The property must always be owner occupied. 

Do all peoples involved need to be on the title of the property?

Yes. In order to utilize this system all parties involved must be current registered owners on the title of the subject property which will be confirmed by your solicitor with a title search.

Is this system only relevant to married or common law spouses?

No. This system is for anyone who is on a mortgage with another person and wants to buy them out. This could be a spouse, sibling, parent or friend. If, however, the person(s) you are involved with are not an ex-spouse you will need a standard clause added to the purchase contract to outline the terms of the buyout.

Will I need a full appraisal?

Yes. You will be required to have a full appraisal of the property to complete the purchase.

It is always good to investigate all your options and legal requirements to help guide you through a marital breakdown. Working with an experienced mortgage expert will ensure you the best outcome with the most amount of options. Call us anytime to get sound advice from the people who have extensive knowledge and experience. We are always here for you and look forward to answering any questions you might have.