Scissors cutting through a paper family alluding to family divorce or separation

Going Through a Separation or Divorce? I Can Help

Matthew Jackson Mortgage Tips

No matter how prepared you feel when your marriage breaks down, navigating separation and then divorce is an emotionally draining experience – regardless of who initiated the process.

Separation and divorce can also be expensive as you begin dividing your finances and assets. Getting an early start on these proceedings can save you a lot of time, stress and even money down the road.

What do you do with the matrimonial home? Is one of you thinking of staying in the home? Are you going to sell and split the proceeds?

If you decide to stay in the home – for the sake of the kids or your own sanity – it’s important to first examine your finances to determine if you can comfortably afford to buy out your spouse. If you’ve decided to remain in your matrimonial home, but the mortgage payments, taxes, monthly bills and upkeep push you to your financial limit, it may be smarter to sell, split the proceeds and then buy another property.

 

Special mortgage programs

I have access to mortgage options that your bank may not think to offer, which could save you a lot of stress and money. When refinancing a typical mortgage, you can only access up to 80% of the home’s value. But, through an Equity Buy-Out Program, you can essentially buy the home from your spouse and unlock up to 95% of its equity.

A young girl sitting a couch reading in a nicely decorated home, highlighting the chance to keep your existing family home when going through separation or divorce

Equity Buy-Out Programs may allow you to buy out your spouse and stay in your home after a separation or divorce

This added access to funds often makes the difference between one spouse being able to buy out the other’s half of the home, versus having to sell the home and find two new separate places to live.

 

Equity buy-out example

$500,000 Home Value

Regular mortgage refinance:

80% LTV – $400,000

2.79% 5-year fixed rate with a 30-year amortization

= $1,638 monthly payment

 

Equity buy-out program:

Buy-out with amortization back up to 25 years

Fully new chargeable lender Insurance up to 95% LTV

$475,000 + Lender Insurance ($19,000) = $494,000

2.64% 5-year fixed rate with a 25-year amortization

= $2,248 monthly payment

As you can see outlined above, with an equity buy-out, you’re able to access an extra $75,000 on top of what would be available through a regular refinance. You must, however, pay a new lender insurance fee of $19,000.

 

Another option is to top-up the buy-out while keeping the amortization the same:

Example using 15-year amortization

Current pre-buyout mortgage of $300,000

New funds of $175,000 for total of $175,000

$175,000 at 6.3% lender insurance top-up fee = $11,025

Total mortgage of $486,025

2.64% 5-year fixed rate with a 15-year amortization

= $3,270 monthly

 

A buy-out that keeps the same amortization may be eligible for porting the current lender insurance fee, which would be quoted from the current insurer (CMHC, Genworth or Canada Guarantee). This can either end up being a port of the existing insurance premium or an increase on top of existing lender insurance, but still less than the full top-up.

Have questions about your mortgage options during separation or divorce? Answers are a call or email away.