Spousal Buyout

Mortgage Advice for Separating Couples

If you are going through a separation and divorce, homeownership decisions can become very complicated. You may choose to keep co-ownership of the house. If you do, then both partners’ names will remain on the title. An arrangement has to be made by both partners agreeing to continue the mortgage payments.

Eventually, there will come a time when one partner wants out of the agreement and wants the money they contributed to its equity.

One option for paying them out is by refinancing your mortgage. With mortgage refinancing, typically you can only refinance up to 80% of the equity. However, if it is due to a marital breakdown, a spousal buyout mortgage will let you get up to 95% of the home’s equity.

There are some requirements in the spousal buyout program. For example, it can only be used to pay out the other partner’s equity. The buyout can also pay any joint marital debt. The lender will require you to re-qualify for the mortgage. A formal buyout agreement and written legal documents confirming the separation will also be required. Some lenders request a list of assets as insurance and an appraisal of the house. Insurance for the buyout mortgage is also needed.

As of Jan. 1, 2020, the Alberta government is including common-law partners and interdependent partners in family property legislation. This will mean they can apply for the buyout programs as well. Previously, friends or family who bought into a home together could not access this program. Therefore they would struggle to buy the other partner out.

The new legislated changes are going to help couples who are parting ways better be able to deal with property issues in the event of a divorce. Divorce and separation are tough enough without fighting over selling mutual assets.
Before considering refinancing, you need to be careful and know what your ability to cover the costs of monthly mortgage payments, fees, penalties, interest, and appraisal fees. Especially when you don’t have a second contributor to the mortgage.

But don’t worry if you find yourself in this position and stressing over refinancing or selling your home. I can help you through the process. With my knowledge of home mortgage programs and my personal experience in dealing with refinancing, we’ll find a solution that works for all parties.

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