If you happen to be going through, or considering a divorce or separation, you might not be aware that there are mortgage products designed to allow you to refinance your property in order to buy out your ex-spouse.
For most couples, their property is their largest asset and where the majority of their equity has been saved. In the case of a separation, it is possible to structure a new mortgage that allows you to purchase the property from your ex-spouse for up to 95% of the property’s value. Alternatively, if your ex-spouse wants to keep the property, they can buy you out using the same program.
Here are some common questions about the spousal buyout program:
Q: Is a finalized separation agreement required?
A: Yes. In order to qualify, you will be required to provide the lender with a copy of the signed separation agreement. The details of asset allocation must be clearly outlined.
Q: Can the net proceeds be used for home renovations or to pay out loans?
A: No. The net proceeds can only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly agreed upon in the finalized separation agreement.
Q: What is the maximum amount that can be withdrawn?
A: The maximum equity that can be withdrawn is the amount agreed upon in the separation agreement to buy out the other owner’s share of property and/or to retire joint debts (if any). The new mortgage can't exceed 95% of the property value.
Q: Do all parties have to be on title?
A: Yes. All parties to the transaction have to be current registered owners on title. Solicitor is required to do a search of title to confirm.
Q: Is a full appraisal required?
A: Yes. When considering this type of a mortgage, it is similar to a private sale and a physical appraisal of the property is necessary.