There is an option!
Divorce or separation can be messy, confusing, and not always black and white. Dividing joint assets between two people can be tricky. Especially when it comes to your home. Selling the marital house and dividing the proceeds equally can work for some people. However, sometimes one partner wants to stay in the home. This is where a mortgage broker can help with a spousal buyout program. Spousal buyouts can be a win/win for both sides because the person who wants the house can potentially stay and the other partner can be paid for their half.
Partner A wants to buy partner B’s equity in the marital home. Partner A must qualify for the mortgage without partner B. To do this your mortgage broker will fill out an application, take a list of assets, check partner A’s credit score, and determine if they can carry the mortgage on their own.
When doing a spousal buyout, it is important to have a signed separation agreement and have the purchase included in that agreement or a separate purchase agreement between partner A and partner B. Using a lawyer for this is highly recommended. Most often the fairest way to determine a purchase price is to have a full appraisal done of the property by a licensed and accredited appraiser.
If partner A wants to keep their current interest rate - the mortgage balance, term, and amortization must remain the same. If partner A needs a higher mortgage balance to payout partner B, then the lender will look at doing a blended rate on the new money. A perk to utilizing a spousal buyout program compared to a regular refinance is, partner A can potentially borrow up to 95% of the home’s value, compared to only 80% maximum on refinances.
Check with your lawyer or notary to confirm if your spousal buyout is exempt from property transfer tax. There will be fees not included in the mortgage balance for this transaction. You might be required to pay for an appraisal, along with legal fees to remove partner B from title of the property.
If this is something you need help with, chat with one of our experienced brokers today!