Spousal separations can be touchy subject, but there are options for you in terms of mortgages. There are a few things that those involved need to decide on – whether one of the spouses wants to keep the house, if that spouse is going to buy the other spouse out, and if you want to pay off joint debts. You will need to have a legal separation agreement drawn up that outlines the above.
A spousal buyout occurs when one spouse buys out the other spouse – essentially you are purchasing the home from your spouse and yourself. You have the ability to go up to 95% loan to value or in other words you can obtain a mortgage for 95% of the value of the home. This allows the one spouse to keep the home while the other spouse receives the equity they deserve. In order to determine the value of the home, an appraisal will need to be completed.
In order to qualify for a Spousal Buyout, the spouse keeping the home has to have the ability to afford the mortgage and any other debts on their own income. They must have good credit and both partners must be on the home title. It is important to keep in mind that an Offer to Purchase and Separation Agreements need to be drawn up.
If there is enough equity in the home, joint debts can be paid out if need be to help with the spouse keeping the home, qualify for the mortgage. The debts that are being paid out need to be listed in the separation agreement.
· Separation Agreement outlining joint debts to be paid out and equity for spouse being bought out
· Offer to Purchase that has the purchase price of the home and other relevant information
· Income Documents for spouse who is buying the matrimonial home (could include, but not limited to job letters, pay stubs, T4’s, Notice of Assessments)
Separation can lead to turbulence and allowing one partner to keep the matrimonial home can lead to some stability.