Separation Mortgages

In many cases, the marital home is owned by both parties and is often the most profitable asset that needs to be divided following a separation. Now you may be wondering if it is best to sell your home, or if there is a way you can stay in your home. Let’s look at those two options below.

Sell Your Home

• When selling your home, both parties agree to liquidate your asset and pay out your remaining mortgage balance in full, including a mortgage penalty, and realtor fees. All the left-over funds, also known as your net equity, can be split up as agreed.
• This step does not require a mortgage advisor, though if you are looking to take that next step with purchasing your next home, reach out to our team and we’d be happy to help you plan for that next big move.

Refinance And Stay in Your Home

• If you decide to buy out your partner and take sole ownership of your home, our team at Boychuk Mortgage Group can help. With a separation mortgage, we will help you buy out your partner, retain the value you’ve built up in your home, and keep that desired stability for you and your family.

How Do I Refinance to Stay?

• When refinancing your home, the party leaving will request a “release of covenant” from the lender and you will “assume the mortgage’ through the process of requalifying. If there is an outstanding net equity balance in the home, you will be able to refinance the mortgage in your own name up to 95% of the homes current value to pay out the other party. This process will result in you registering your new mortgage solely in your name and hopefully includes enough cash to pay out any affairs.
• It’s important to note that with less than 20% equity left in your home, you will not be able to pull out any additional cash for personal use/debts.

No!

• With an accepted separation agreement, we can get the process started for you. However, it will be a condition to your financing that the separation agreement is completed prior to funding.
• On a case-by-case basis, if your agreement is not finalized, but your legal team can confidently confirm in your agreement a “minimum” value of funds that will eventually be disbursed to each party, we can sometimes get that exception.

Yes!

• In almost all cases, a separation agreement is required as a fundamental component to securing you your new mortgage.
• A separation agreement is the initial process whereby both parties come to an agreement on any spousal support, child support, custody arrangements, and the division of relationship assets/ debts.
• Lenders will require a separation agreement to establish a better understanding of the affordability within your new mortgage, based on any support owed or received and the disbursement of any joint assets.
• In cases where no support is payable and there are no shared assets, we can request a statutory declaration, also known as a “stat dec”, with your lender, which will be signed at completion with your lawyer.

No!

• While a separation agreement is required, it is not mandatory that your agreement be legalized by your lawyer. In provinces like BC, this agreement needs to be signed by both parties and witnessed.

• Your separation agreement will specifically outline the division of all joint assets going to either party.
• If you are using these assets towards the down payment of your new home, you will need a minimum of 3 months of bank statements, or confirmation from your lawyer’s order to pay statement.

• Absolutely, just get in touch with one of our advisors and we will walk you through each step of the process. We will identify how much you are able to qualify for and factor in any additional income like child support, spousal support or child tax benefits.
• We will help you put a plan in place, helping you meet your needs for today and goals of tomorrow.

No!

• In Canada, a separation period of 12 months is required prior to being able to finalize a divorce. For this reason, we can get you into your new mortgage at any time during the separation period.

A separation mortgage is a type of home loan designed for individuals who are going through a separation or divorce. It allows one spouse to buy out the other's share of the property or refinance the existing mortgage to suit their financial situation post-separation. This mortgage helps manage the division of assets and enables individuals to retain ownership of the home.

A separation mortgage can provide several benefits:

• Property Buyout: It allows you to buy out your former partner's share of the property, facilitating the division of assets.
• Refinancing Opportunities: You can refinance the existing mortgage to adjust terms, lower payments, or consolidate debts related to the separation.
• Financial Stability: It offers financial stability during a challenging time, ensuring continuity in homeownership and providing a clear path forward post-separation.

Commonly required documents include:

• Personal identification (such as driver's licence or passport)
• Proof of income (recent pay stubs, income tax returns)
• Divorce or separation agreement outlining property division
• Mortgage statements and property appraisal
• Bank statements and proof of assets
• Proof of any financial obligations or debts

These documents may vary depending on the lender and your specific financial circumstances.

Yes, one of the primary purposes of a separation mortgage is to facilitate the buyout of your partner's share of the property. This allows you to retain sole ownership of the home and manage the division of assets as part of the separation process.

Yes, you can still apply for a separation mortgage while going through the separation process. Lenders understand that separation can be a lengthy legal process, and they can work with you based on your current situation. It's important to provide documentation such as a separation agreement or legal paperwork outlining the division of assets to support your application.

The duration of the separation mortgage application process can vary depending on factors such as the complexity of your financial situation, the lender's processing times, and the completeness of your documentation. On average, the process can take anywhere from 1-3 weeks or longer depending on the borrower’s ability to provide an application & lender required documents.