As the largest asset in most relationships, the matrimonial home often becomes a major focal point in a separation.  In turn, mortgages become a key part of separation discussions.  Here are some common options for dealing with the matrimonial home in a separation:

Sell

This is definitely the simplest way of putting joint debts behind you by releasing all ownership and mortgage obligations.

One Party Stays Mortgage Lender Releases Other Party

If one person would like to stay in the home you can start by contacting your mortgage lender to get the other person released from the mortgage. They will generally confirm that the remaining person can handle the mortgage on their own. This only works if you do not need to pull equity out of the property to pay out the person leaving the home. You do not want to be removed from title until you are removed from the mortgage loan. You would still be responsible for the debt and any fallout from missed payments or default (including impact on your credit!) but have no ownership rights.

One Party Stays - Refinance To Remove Other Party

If you do need funds to pay out the party leaving or if your current mortgage lender will not release them from the mortgage loan, then you should consider a refinance. This is where the mortgage is fully restructured to take one person off the mortgage.  This only works if you have significant equity in the property because refinances are limited to 80% of the current value of the home.  The person who will keep the property needs to be able to qualify for the home on their own.  

One Party Stays - Spousal Buyout

If one party would like to stay but you do not have 20% equity in your property for a refinance, there is still an option to buyout your spouse. This is an insurer program than not all banks use, so you want to speak to a mortgage broker about this option. One party can purchase from the other with the minimum required down payment (5% down payment on the first $500,000 of value and 10% down payment on any value above $500,000).  It is treated as a new purchase so the amortization can be up to 25 years and there is no limitation on the type of term or product. Here are some conditions and features of a spousal buyout:

• The down payment can be equity in the house

• Valid for marital and common law separation, and some joint ownership situations

• Only available on the primary residence in the relationship (no investment properties)

• Both individuals must have been on title prior to the separation

• There must be a legal separation agreement in place

• The purchaser must still qualify based on income, credit, etc.

• An appraisal determines the sale price

• No realtor involvement

• Standard mortgage insurance premiums apply

• The current mortgage lender must allow it.  Some value mortgages do not allow a private sale to a related party (ex. BMO Low-Rate Mortgage)

The seller is now off the property title and off the mortgage, allowing them to move on to a new purchase if they choose. 

If you are going through a separation or know someone who is, I can provide information about the mortgage options available and help prepare you to qualify for the new financing you may require.