When we tie the knot with a soulmate, we assume it’s going to be forever. It’s pretty much written in the vows. Unfortunately not all marriages have fairytale endings. In fact, a significant amount of marriages in Canada end in divorce. The most recent data suggests 38 per cent of all marriages in Canada don’t last until death. Over 70,000 per year. The average marriage lasts 14 years, with 42 per cent of divorces occurring in marriages lasting between 10 and 24 years.
The reasons for the divorce rate are many and complicated and not really necessary to discuss here.
What we do know is, divorces can get ugly and costly for both individuals involved. And if the marriage is years old, there’s likely a home or property that gets caught in the middle.
A typical divorce scenario sees that when the couple breaks up, the matrimonial home is sold and what’s left over is split. In almost all cases, even when one party wants to keep the home, the lawyers, banks and other professionals recommend selling the home. It makes sense, since most couples get a mortgage they can afford together, not on their own. That or due to refinance regulations that came in to play a few years ago, the home is not seen to have enough equity to fully pay out one of the parties unless sold. If the home is full of memories, or children are involved, it can be an extremely painful situation. You not only have to start a new family dynamic, but also do so in totally new homes as well.
There is a unique alternative very few professionals even know exists. All three of Canada’s mortgage insurance providers, Canada Mortgage and Housing Corporation, Genworth Financial and Canada Guaranty, offer what’s called a spousal/partner buyout program.
This program allows one party to refinance the matrimonial home up to 95 per cent of its appraised value, and pay out any debts related to the marriage.
Traditionally, you can only refinance on an existing mortgage up to 80 per cent of the appraised value.
The program is considered a purchase, so all the requirements and qualifications needed in a traditional purchase mortgage apply. In this case, you’ll also need a purchase agreement and a separation agreement with all the debts and payments spelled out up front.
The buyout program is a one-time opportunity. It can be used to pay off other debts outside the separation agreement, but this depends on which one of the three insurers used.
Even with a helpful loan-to-value ratio, some people still can’t afford to take on the home on their own. The program can also allow people to bring on a cosigner in this scenario, often a new partner or family member.
At the end of the day, divorce is unfortunate and very difficult. The program strives to allow you to keep your home and kids can remain where they’ve grown up and feel comfortable. And that makes the situation at least somewhat more bearable.
If you find yourself in a relationship / matrimonial breakdown and you’re not sure what to do about your home, a mortgage professional who has experience with this program should be consulted before making any important decisions. We can work with the lawyers to ensure proper steps are taken initially to ensure this program is considered and to determine if it can be used to keep the matrimonial home if desired. Even if you’ve already been told “No” by your bank / existing lending institution.
Click HERE to get in touch for information / advice on this program. All conversations are in strict confidence!