Your mortgage after a divorce
by Denis Doucet
What you’ll learn
- You have three options when you divorce
- Sell your share to your ex-spouse
- Take the time to restore your finances
- Take over the entire mortgage
- Am I still responsible for the mortgage?
During a divorce, it’s inevitable that you have to discuss what you’ll do with your home. There are many reasons why an ex-spouse may or may not want to keep the property: he or she may feel attached to the house, or, on the contrary, would like to leave the past behind.
Whether you want to start anew by moving or minimize the impact of your divorce on the kids by keeping the house, make sure you talk to professionals to get sound advice. Your notary will proceed with the transaction at the right moment; but beforehand, your mortgage broker can help you determine whether you can pay a mortgage, given your new financial situation.
The 3 options you have during a divorce
1. Sell the house
Oftentimes, selling the house is the most likely option for both parties, because the house no longer fit the family’s new reality. It’s important to remember that if you are married, whether or not a spouse’s name appears on the house’s sales contract, each party has the right to half of the family wealth. This law does not apply to common-law relationships.
2. Buy your ex-spouse’s share/Sell your share
In order to give your kids some stability, you may want to buy your ex-spouse’s share of the house or sell y our share. In this case, make sure you have your house evaluated by a certified professional to determine its market value.
If you decide to buy your ex-spouse’s share, you can get up to 95% financing on the house’s market value. Don’t forget to factor in costs associated with transferring the property into your name (notary fees, transfer taxes, etc.).
3. Opt for a temporary status quo
Perhaps neither you nor your ex-spouse are ready to make a major decision regarding the house. It’s not necessary to make a quick decision. You can decide later on, even if one of you remains in the house. By postponing the decision for a while, you allow for things to settle down. You can take a step back and make a more rational decision as to what you want to do with the house.
Some people will take this opportunity to evaluate and reorganize their finances, such as increasing their credit in order to buy a new home. Be careful! If the mortgage is still valid once you move out, you and your ex-spouse are nevertheless both responsible for it. This can negatively impact the purchase of a new home. Your mortgage broke can give you the details on concrete ways to re-build your credit.
- During a divorce, you have three options: sell your home, buy your ex-spouse’s share or sell yours, or opt for a temporary status quo.
- Speak with a mortgage broker to make a well-informed decision.