If you’re going through a separation or divorce, you may be wondering what will happen to your mortgage. In BC, Canada, there are a few different options for how to handle your mortgage after separation. We understand that this is a difficult time for you, and we are here to help you through it. Continue reading to learn more about your options.
It’s a well-known fact that divorce can be a harrowing affair that deeply challenges a person emotionally and financially. Very little of the former relationship remains, apart from a few joint responsibilities and a certain kind of reasoning with each other. Most of the responsibilities are very clear from the get-go and can easily be split up among the divorcees through what is called a Separation Agreement. This also includes child support, spousal support, and the division of debts and assets.
But what happens when a divorce leaves behind a joint mortgage? A mortgage that the two embarked upon together and that now needs to be settled somehow.
This situation is pretty common since it implies that the members of the former couple do not want to live in the same house anymore — and the property remains the biggest asset they share.
Thankfully, when it comes to a mortgage after separation, Canada comes with a clear set of rules and regulations to follow. In fact, there are several ways in which divorcees can tackle this issue.
1. You Sell The Home
It’s common for couples who used to reside together to decide to sell the property after their divorce.
Of course, when there’s a mortgage involved, you need to pay the loan off, together with all the other costs associated with the sale. Include the mortgage payout penalty you’ll incur, any commission charged by the real estate agent and, of course, the attorney’s fees. All in all, these are pretty hefty costs, but if you both have these amounts handy, then selling the joint asset may be the way to move forward.
When it comes to solving a mortgage after separation, BC, Canada, is well-equipped to offer the parties involved solutions to all of their loan troubles. The Separation Agreement outlines that any amount of money left over after the sale is completed will be split between the two parties.
2. You Stay In, And You Buy The Other Part Out
In some cases, one of the former spouses wants to continue residing in the family home. However, for that to happen, they need to buy the other spouse out since they will continue to benefit from the asset.
In such a case, a ‘release of covenant’ is due and will allow the person moving away to become exempt from mortgage obligations. The staying partner, though, will be assessed once more and will need to qualify to take on the responsibilities of the existing mortgage. Both parties will need to have enough funds to settle everything between them.
3. You Stay In And Refinance
If you do not have the funds to buy out your former spouse and if there is enough equity in your home, you can consider refinancing. This will allow you to continue living there and keep the property. When it comes to mortgages after separation, since divorce numbers are high in BC and Canada in general, people have found a way to make this process a little less rocky.
With this in mind, refinancing will allow you to borrow against the equity of your home but will not endow the person staying in with funds for personal use. Of course, to qualify for a mortgage refinance, you’ll need to have a good credit score and enough income to pay off everything.
Additionally, your former spouse must also be open to the idea of selling their share of the house equity to you. It goes without saying that parting ways amicably will serve both parties down the line.
4. You Both Continue To Pay Off The Mortgage
The less ideal version of dealing with a mortgage after separation in Canada is when both spouses continue to hold onto the property even after the divorce.
In general, divorced couples resort to this when they don’t have enough money to buy the other spouse out — and can’t sell the home either.
Considering a divorce occurred, it’s less likely for the relationship to be steady and for both partners to count on each other to hold up their end of the deal. This is a risk that, if you’re willing to take, you’ll need to also take full responsibility for should things get even sourer in the relationship.
Any missed payments from the other spouse will fall directly on your shoulders, which can be quite a burden. After all, there is a mortgage contract, and its terms need to be fulfilled.
Separating from your partner can be a difficult and emotional time. There are a lot of decisions to be made, and it can be hard to know what to do with your mortgage. A mortgage broker can help you understand your options and find the best solution for your situation.
Your broker can help you:
- Understand your mortgage options
- Find a mortgage that meets your needs
- Negotiate with your mortgage lender
- Get the best mortgage rate
Don’t hesitate to contact us if you want access to the best lenders in BC, Canada. We can deliver the best offers that suit your personal situation and lend a hand in what we know is a challenging stage in life.
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