So the reality of the world is that a large number of marriages end up in divorce. This is a hard enough time in anyone’s life so the lenders and the mortgage insurers have come up with a product that can help. It is the ability to refinance your matrimonial home up to 95% of its value to payout your ex their portion of the equity and perhaps even some of the debts you incurred together. This is a specialty product and there are certain things you must do. Let’s take a look, shall we?
Step 1- Legal Separation
You must complete a legal separation agreement through a lawyer. Even if it is the most amicable split in the history of mankind, this has to be done. The reason for this is you want your rights protected fully. If you are the one staying in the house, you want to make sure that your ex has legally and irrevocably given up their rights to the home. If you are the one leaving, you want to make sure that your name is removed from the title so there is no question of you having any further obligation where it is concerned. There will be a cost associated with the legal separation agreement. How much? I would not dare to say but I would budget a bare minimum of $2,500. It is also important to keep in mind that legal matters often take more time than anticipated so don’t imagine you will be able to get this completed in a hurry. Make sure that you address any debts taken on during the marriage. These can be paid out from the proceeds of the new mortgage but only if they are listed.
Step 2 - Appraisal
Order an appraisal. This has 2 reasons. The first is that you and your ex will be able to determine the true value of the home through an impartial third party. The second is that most lenders require it in this situation.
Step 3 - Offer to Purchase
Write up an offer to purchase. This one always catches people off guard. Why would you have to write up an offer to purchase on a property you already own? The answer is just this. The lenders require it. This legally binding document shows the agreed upon price and the final closing date to which both parties have agreed. This can be completely through your lawyer, with the help of a willing Real estate professional or on your own with a form available online.
Step 4 - Get a Mortgage
Get a mortgage. You have likely been in contact with your mortgage professional before now but if not, then now is the time. You are going to have to provide:
Offer to purchase
Letter of employment and Paystub
Last 2 years Notice of Assessments or T4’s
Any other required documentation
It is very important to note that you will incur new mortgage insurance premiums if you go right to 95% of the home’s value even if you had already done so on the same property. This is a brand new application with you as the sole borrower so a full new premium applies.