Mortgage Blog

95% Loan to Value Spousal Seperation Mortgage

March 30, 2017 | Posted by: Laurie Anne Faulkner

Going through a Separation or Divorce?

Your home can be the asset that gives both partners a fresh start.

For many separating couples, their home is their most important asset. That’s why seeking the advice of a mortgage professional very early in the process can help set the stage for a successful separation – so the two of you can each make the best possible start on a new path.

If you have a final separation agreement, we can show you how the value in your home and the power of your mortgage can help you both move forward on firm footing.

  •    Is one Spouse hoping to stay in the existing home?

Many couples assume that the house must be sold – but that’s not always the case. One option is the home can be refinanced up to 80 per cent of its value. You’ll need to determine if this equity can pay off joint debt and provide a payout if it’s required to the other spouse. Or one spouse can purchase the home outright from the other spouse who then comes off title.

A Spousal Separation Mortgage allows a buyout to 95 per cent up to $500,000 and an additiaonal 10% on the value over $500,000, which can provide a fair buyout and possibly pay off any other joint debt. 

  •   Does the other spouse want buy a new home?

We  can let you know what you can qualify for and what is affordable for you in your current financial situation after you have been bought out of your current home.

Divorce or separation doesn’t need to spell the end of financial hope. We can help you look at your options – as an individual or as a couple.

Spousal Separation – 95% Maximum loan-to-Value (New Guidelines)

In situations where two parties are on title to a property in the process of a legal separation where one party will keep the existing property, the following guidelines will now apply:

  • Both parties must be on title to the property prior to the legal separation
  • The following documents confirming the sale price and transfer of title must be on file
  • Finalized separation agreement
  • Offer to purchase  - from one spouse to the other

Since this purchase transaction is non-arms length. a full internal appraisal is required

Further FAQ’s regarding spousal separation guidelines.

  • How is the down payment created? – In a 95% LTV scenario the 5% down payment comes from the existing equity
  • How is the insurance premium fee applied? – If the existing mortgage was previously insured by only a top-up fee would apply, otherwise a full insurance premium would be applied.
  • If the purchasing spouse didn’t need the full 95% to buy out the other party could they still chose to take the LTV up to 95%? – Yes, as it is considered by the lender to be a new purchase. OAC*

$500,000 – property value
$250,000 – mortgage balance
$125,000 – equity payout equalization

*In this case the LTV is only be 75% but additional funds could be drawn to pay off debt or for a down payment on a second purchase - the LTV could be taken to 95%

Call me to discuss your optione, Laurie Anne 250-588-2288

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