Like Divorce Isn’t Hard Enough, You Have to Sort Out Your Mortgage As Well!
Did you know that 40% of Canadian marriages end in divorce before their 13th anniversary?
While separating from your partner is definitely an emotional challenge, the financial implications, like handling a shared mortgage, add even more stress.
So whether you’re thinking of keeping the home, selling it, or refinancing, you should know your options and avoid mistakes to avoid regrets later.
With this guide by Pradip Maheshvari, learn everything about divorce mortgages in Canada from refinancing tips to understanding joint mortgage risks. Let’s dive in!
Divorce Mortgage Canada: Understanding the Aftermath!
1. Split Proceeds After Selling the Property:
This is often the most straightforward and less troublesome solution. Selling your property will allow both parties to move on financially and legally split the equity.
However, market conditions can influence how quickly and profitably the home sells. So, selling the property right away isn’t the best option.
Example: Let’s say you bought a house for $400,000. Over time, the value of the property increases, and now it’s worth $500,000.
You still owe $300,000 on the mortgage.
To find your equity, subtract what you owe from the current value of the house:
$500,000 (current home value) – $300,000 (mortgage) = $200,000 equity.
So, you now have $200,000 in equity in your home!
2. Refinance to Buy Out Your Divorcee
Thinking of keeping the home? Well, Refinancing a mortgage is one way to buy out your partner’s share. This process involves applying for a new mortgage based on your credit score, income, and debt levels.
Read More: Five Tips On How To Refinance Smartly?
What Are Your Options If You Can’t Refinance?
If refinancing isn’t feasible, don’t panic. You still have alternatives:
- Negotiate a deferred sale until the market improves.
- Explore co-signing options with a trusted family member.
- Consult a mortgage professional for creative financing solutions.
3. Keep the Joint Mortgage—But Proceed with Caution!
While some couples opt to keep a joint mortgage temporarily, this can be risky. If one party misses payments, both credit scores will take a hit, and future borrowing could be affected.
Divorce Mortgages Canada: Pitfalls to Avoid!
- Overestimating Your Budget: Post-divorce, your income might be stretched thinner. Make sure you can comfortably afford the mortgage on a single income.
- Forgetting Legal Agreements: Always have clear, legal documentation outlining who is responsible for payments—even if you’re on good terms.
- Ignoring Property Taxes and Maintenance: Beyond mortgage payments, consider property upkeep costs.
How Pradip Maheshvari Can Help You Navigate Divorce Mortgages Canada?
Divorce can feel overwhelming, but your mortgage doesn’t have to be part of the stress. I offer unbiased advice to help you decide whether to refinance, sell, or keep your home.
Avoid unnecessary stress and protect your financial future.
FAQs About Divorce Mortgages
How Does Divorce Affect My Credit Score?
Divorce itself doesn’t impact your credit, but missed payments on joint accounts can. Ensure clear financial agreements are in place to avoid late payments.
Do Both Parties Have to Agree to Sell the Home?
In most cases, yes. Both parties typically need to consent to the sale, unless a court orders otherwise.
Can One Person Stay in the Home Without Refinancing?
It’s possible if both parties agree, but the person moving out remains financially responsible unless refinancing removes their name from the mortgage.
What If My Ex Stops Paying Their Share of the Mortgage?
You’re both liable for the full payment. If your ex defaults, it will affect your credit too. Legal action may be necessary to resolve disputes.
Is It Possible to Get a Mortgage While Going Through a Divorce?
Yes, but lenders may require additional documentation about your financial obligations and pending divorce settlement.
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