Recently, I had a past client call me looking for advice, as him and his partner were parting company. The conversation quickly shifted to the mortgage/ matrimonial home and what this means for them. Traditional refinancing only allows for a maximum 80% to be refinanced through an institutional lender. Most bank representatives and other licensed mortgage agents/ brokers are unaware of program offered through CMHC, Sagen, or Canada Guaranty which allows the matrimonial home to be refinanced up to 95% of its value based on certain conditions. This is a very popular option for separating/ divorcing as it saves former couples from having to potentially sell the home and incur costs associated with selling. Essentially this allows one spouse to keep the home and avoid moving while enabling them to pay the other spouse their portion of the equity.
After discussing income, debts, approximate home value etc. I informed them there could be a strong possibility, he could be an ideal candidate for this program. I suggested they keep me abreast of how discussions progress with the family lawyer and to loop me in once things are further along.
Key Points To Note:
- The client must be able to afford to carry the mortgage. * A co-signer could be a possible solution if this is a potential issue.
- Both the parties must be on the deed to the property.
- A legal separation/ divorce agreement and a purchase agreement must be prepared by a lawyer.
- If the home appraises at $499,999 or less, the client can qualify for an insured mortgage up to 95% of home value.
- If the home appraises over $500,000, you can get up to 95% of the first $499,999 and up to 90% of the remaining value up to $999,999.
- Under current legislation, the spousal buyout program caps at $999,999. Should a client’s home be worth more than 1 million, which isn’t hard in today’s market, there could be other solutions/ creative ideas to suggest which could avoid selling the home.
- All the above points and ideas are subject to change at any point and are intended for high level consideration.
If you know someone who is going through a separation/ divorce, have them call me to discuss their mortgage options, to see if there a possible solution to avoid selling the matrimonial home and saving tens of thousands in unnecessary costs.