Relationships and marriages don’t always succeed, and there may come a time in many of our lives when we are forced to separate from a partner with whom we share a property.
While separating is never easy – in fact it can be extremely complex and painful – it doesn’t have to mean that you lose your home, and while many couples choose to sell their home and split the equity in some way, there is another solution:
The spousal buy-out program
If both parties no longer wish to remain in the home they once shared, then a spousal buy-out won’t be for them, but if one party does wish to stay in it (perhaps because of children who may be enrolled in a good school, for example), then this could be a great alternative to selling the property.
The spousal buy-out program is backed by all three of Canadas mortgage insurance providers, and is designed to enable one party to refinance the shared home up to 95% of its appraised value. To qualify for the program, both parties must be on the deed to the property, and as a one-off opportunity, the program also enables both parties to pay off other debts outside of the separation agreement.
Can you afford it?
While the cost of purchasing a home from anyone can be high, with the help of the spousal buy-out program, you can mitigate those costs by bringing in a co-signer, who could be an existing family member or even a new partner, to help.
If you would like to hold onto the home you shared with your ex-partner with the help of the spousal buy-out program, there are a few things you’ll need:
- • An appraisal
This will be required to help determine Equalization of Assets, but unless ordered by a third party, it might not be acceptable to some lenders. Note that the appraisal must also have been produced within 90 days (less with some lenders) to ensure accuracy, and if the original report was previous to 90 days, you must obtain a new one.
- • A signed separation agreement
Lenders must be provided with a signed copy of the separation agreement in order for you to qualify, and all assets must be clearly allocated within the document.
- • An agreement of purchase and sale
A standard agreement of sale indicating the new ownership.
- • An employment letter or recent pay stub
The lender will need to see proof of this to verify whether you’re able to fulfil your mortgage requirements.
- • Debt pay out list
For paying off debts outside of the separation agreement, this is a one-time option, of which the proceeds may only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly noted in the signed separation agreement.
Separating from a partner can be a stressful and painful period in your life, but with the help of the aforementioned program, you could gain a little security and peace of mind by remaining in the home you love, with your children. For more detailed advice surrounding the spousal buy-out program, and to find out if you could be eligible, talk to a local mortgage broker.