Divorce Mortgage

Divorce Mortgage

Life after divorce: Turn your home into a fresh start.

When going through a separation or divorce, you ultimately want one thing: to start a new life on the best foot possible. When you seek the advice of a mortgage professional early in the process, you can make this goal a reality by leveraging your most important asset—your home.

For many separating couples, this involves taking advantage of the Spousal Buyout Program—a mortgage that allows one spouse to purchase the home outright from the other, who then comes off the title. This type of mortgage allows you to access up to 95% loan to value (LTV) of your home, as opposed to the 80% LTV offered by a traditional refinance.

Example: Spousal Buyout Program

Lance and Jenny have decided to separate. Lance wants to keep their family home, and Jenny wants to purchase a new property. Let’s look at their financial information at a glance:

Home value: $425,000
Mortgage balance: $350,000
Equity: $75,000 ($425,000 - $350,000)
Credit card debt: $15,000

The couple would like to split their existing equity equally, so Lance would have to pay Jenny $37,500 to buy her out of the home. If they can, they’d also like to pay off their $15,000 in joint credit card debt through the refinance. To do all this, Lance would need a new mortgage of at least $402,500 ($350,000 + $37,500 + $15,000).

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If they were to go the traditional refinancing route, they would only be able to acquire a mortgage worth 80% of their home’s value, which would look a little something like this:
$425,000 x 0.8 = $340,000

Since the maximum loan amount is $340,000—a number that is less than their existing mortgage—it’s definitely not enough to buy Jenny out of the mortgage, let alone tackle their credit card debt.

Under the Spousal Buyout Program, the couple can access up to 95 percent of their home’s value. When you crunch the numbers, it looks like this:
$425,000 x .95 = $403,750

The maximum loan amount in this situation, $403,750, is more than enough to buy out Jenny—giving her $37,500 to put towards a new home—and to pay off the joint credit card debt.

Need a fresh start? Contact me to find out how the Spousal Buyout Program can work for you.

*Mortgage insurance premiums are payable above 80% LTV and each mortgage insurer has specific requirements. Payout penalties may apply on the existing mortgage. Subject to qualification

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