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buying our your spouse in a mortgage
Date published
Post Categories Mortgage Tips, Separation Mortgages

How to Buy Out Your Spouse During Separation or Divorce

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When you purchase a home as a couple, separation or divorce are never really thoughts in your mind. But, it can become a reality and it’s important to understand your options when you’re put in that situation.

One part about separation and divorce that is overwhelming is dividing your finances and assets. Getting an early start on these proceedings can save you a lot of time, stress and money down the road. 

In this article, I’ll discuss how to buy your spouse out of the mortgage. 

What happens to the house?

If you own a home with your current spouse, one of the biggest decisions is what happens to the home. Are one of you thinking of staying in the home or are you going to sell and split the proceeds?

If you decide to stay in the home, it’s important to determine whether your finances allow you to comfortably afford to buy out your spouse. Consider if the mortgage payments, taxes, monthly bills and upkeep will be too much for one person to handle or if you’ll have enough cash flow to make it possible. If that is possible, one program that may work for you is the spousal buyout program. 

The spousal buyout program.

If one spouse has decided to stay within the home, it’s possible to get a new mortgage to purchase the property from the other spouse for up to 95% of the property’s value.

spousal buy out mortgage

The program I use is called the spousal buyout program. It allows for one spouse to keep the home while paying the ex-spouse their portion of the home’s equity. Not only does this program allow a spouse to stay in the home, it provides stability for the family and any children involved.

Does it matter who’s name is on the mortgage?

During a divorce, the “matrimonial home” is the home where both spouses have their primary residence during the time of the split, regardless of who is on the title of the house. Both parties have an equal right to the home unless there is an agreement that states otherwise. 

Both spouses have to be on title to be able to borrow back up to 95% of the home. This can be common law or married couples.  

This means that the person whose name is on the title of the home stays in the home. If both parties are on the title, then it’s similar to a married couple and you can decide whether one stays or you sell the home.

How do you get approved for the buyout program?

Just like other mortgages, the purchasing spouse must qualify to carry the loan and be approved again during this process. A legal separation agreement and a purchase agreement will be required.

There are a couple of other things to know and will need for this program to work.

  • Net proceeds can only be used to buy out the other owner’s share of equity as explicitly agreed upon in the finalized separation agreement.
  • The maximum equity that can be withdrawn is the amount agreed upon in the separation agreement to buy out the other owner’s share of the property and not to exceed 95% loan to value (LTV).
  • Max. LTV is the lesser of 95% or remaining mortgage + equity required to buy out the other owner and/or pay off joint debt (which, in some cases, can total < 95% LTV).
  • The property must be the primary owner-occupied residence.
  • An appraisal is required.

Ready to get started?

If you’re currently going through a separation and are hoping to buy out your spouse, reach out to me today. The sooner we get started on the approval, the better. If you’ve decided to sell the home and are hoping to purchase another one on your own, I can help with that too! Give me a call at 250-826-3111, apply on my website or contact me through my online contact form.

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