Navigating a mortgage during a divorce or separation in Peterborough, ON, involves specific financial and legal considerations. It's a complex process, but there are options available. Here's a breakdown:

Key Considerations for Divorce/Separation (Spousal Buyout) Mortgages

1. Legal Separation Agreement: This is arguably the most crucial document. Lenders will almost always require a legally binding Separation Agreement (or Minutes of Settlement) signed by both parties. This agreement outlines:
   • Who will keep the home.
   • How the equity in the home will be divided.
   • Any spousal or child support payments.
   • Division of other assets and debts.
   • This document provides clarity for the lender on your new financial obligations.
2. Matrimonial Home Status (Ontario):
   • In Ontario, a "matrimonial home" has special legal status. Both spouses have equal rights to possess the home, regardless of whose name is on the title or mortgage, if they ordinarily occupied it as their principal residence at the time of separation.³
   • Neither spouse can sell or mortgage the matrimonial home without the other's written consent, even if only one name is on the title.
   • The value of the matrimonial home is generally divided equally between married spouses, even if one spouse owned it before the marriage.
3. Refinancing to Remove a Spouse:
   • If one spouse wants to keep the home, they will typically need to refinance the mortgage to remove the other spouse's name from both the mortgage and the property title.
   • This involves qualifying for a new mortgage in your name alone (or with a new co-signer).
   • The refinancing amount may need to be increased to buy out your ex-spouse's share of the home's equity.
4. Spousal Buyout Programs:
   • Many lenders offer "spousal buyout" programs specifically designed for divorce or separation situations.
   • These programs can be a "game changer" as they often allow you to refinance up to 95% of the home's appraised value (compared to the typical 80% for a conventional refinance).
   • This higher Loan-to-Value (LTV) can be essential if you don't have significant cash to pay out your ex-spouse's equity share.
   • The funds from a spousal buyout mortgage can be used to pay out your ex-spouse's equity and/or to pay off joint debts specified in the separation agreement.
   • Eligibility usually requires the home to be the primary residence and a legal separation agreement to be in place.
5. Qualifying on One Income:
   • This is often the biggest hurdle. The spouse who wishes to keep the home must be able to qualify for the new mortgage based on their sole income, credit score, and debt-to-income ratio.
   • Child and Spousal Support: If you are receiving child or spousal support, many lenders will consider it as income, provided it's clearly documented in a legal separation agreement and you can demonstrate a consistent history of receiving payments.
6. Options for the Home:
   • One spouse keeps the home and refinances: As discussed above, this is the most common path if one person wants to stay.
   • Sell the home: This is often the simplest way to divide assets. The proceeds are used to pay off the existing mortgage, and any remaining equity is split according to the separation agreement.
   • Keep the house with both partners on the mortgage (less common): While possible, it's generally not recommended. Both parties remain legally liable for the mortgage, which can complicate future financial endeavors (like buying another home) for the spouse who moved out.
   • Mortgage Assumption/Loan Modification: In some cases, the existing lender might allow one spouse to "assume" the existing mortgage or modify the loan to remove the other name. This is less common and depends heavily on the lender's policies and the remaining spouse's qualification.

Documents You'll Likely Need

• Legal Separation Agreement / Minutes of Settlement: Crucial for all options.
• Proof of Income: Employment letter, pay stubs, T4s, or for self-employed individuals, 2 years of NOAs and T1 Generals (or bank statements for "B" lenders).
• Current Mortgage Details: Statement showing outstanding balance, interest rate, and lender.
• Appraisal of the Home: To determine the current market value and equity.
• Identification and Legal Title Documents.
• Statements for all Assets and Liabilities: Bank accounts, investments, credit cards, loans, etc.

Seeking Professional Help in Peterborough

Given the complexities, working with experienced professionals is highly recommended:

• Mortgage Broker: A mortgage broker specializing in divorce or separation mortgages can be invaluable. They can access various lenders (including those with spousal buyout programs and flexible income requirements). They can help you navigate the process, assess your borrowing power, and find the best solution for your unique situation.

Choosing The Right Mortgage Broker Makes All the Difference—Experience Matters!

With over 30 years of experience in finance, Mike Cara, your Ontario Trusted and Top-Rated Mortgage Broker in Peterborough, specializes in helping clients that most other brokers cannot help.

• Family Lawyer: A lawyer specializing in family law must draft a comprehensive and legally binding Separation Agreement that protects your interests and clearly outlines all financial and property division matters.
• Certified Divorce Financial Analyst (CDFA): While not strictly required for a mortgage, a CDFA can help you understand the long-term financial implications of keeping or selling the home and how it fits into your overall financial future post-separation.

Recommendation:

Start by consulting with a family lawyer to establish a solid Separation Agreement. Once that's underway, connect with a reputable mortgage broker in Peterborough. They can then work with the separation agreement details to explore your mortgage options and help you qualify for the financing you need.