Spousal Buyout Mortgage
Diane Buchanan • June 17, 2020
If you happen to be going through, or considering a divorce or separation, you might not be aware that there are mortgage products designed to allow you to refinance your property in order to buyout your ex-spouse.
For most couples, their property is their largest asset and where the majority of their equity has been saved. In the case of a separation, it is possible to structure a new mortgage that allows you to purchase the property from your ex-spouse for up to 95% of the property’s value. Alternatively, if your ex-spouse wants to keep the property, they can buy you out using the same program.
Here are some common questions about the spousal buyout program:
Is a finalized separation agreement required?
Yes. In order to qualify, you will be required to provide the lender with a copy of the signed separation agreement. The details of asset allocation must be clearly outlined.
Can the net proceeds be used for home renovations or to pay out loans?
No. The net proceeds can only be used to buy out the other owner’s share of equity and/or to pay off joint debt as explicitly agreed upon in the finalized separation agreement.
What is the maximum amount that can be withdrawn?
The maximum equity that can be withdrawn is the amount agreed upon in the separation agreement to buy out the other owner’s share of property and/or to retire joint debts (if any), not to exceed 95% loan to value (LTV).
What is the maximum permitted LTV?
Max. LTV is the lesser of 95% or Remaining Mortgage + Equity required to buy out other owner and/or pay off joint debt (which, in some cases, can total < 95% LTV). The property must be the primary owner occupied residence.
Do all parties have to be on title?
Yes. All parties to the transaction have to be current registered owners on title. Solicitor is required to do a search of title to confirm.
Do the parties have to be a married or common law couple?
No. The current owners can be friends or siblings. This is considered on exception with insurer approval. In this case, as there won’t be a separation agreement, there is a standard clause that can be included in the purchase contract that outlines the buyout.
Is a full appraisal required?
Yes. When considering this type of a mortgage, it is similar to a private sale and a physical appraisal of the property is necessary.
If you have any questions about how a spousal buyout mortgage works, please contact me anytime.
Be assured that our communication will be held in the strictest of confidence.
How Mortgage Payment Frequency Affects What You Pay Over Time You’ve probably heard the saying that there are two certainties in life: death and taxes. When it comes to your mortgage, there’s really just one certainty—you’ll repay what you borrow, plus interest. What is flexible, though, is how often you make your mortgage payments. And that choice can have a meaningful impact on how quickly you pay down your mortgage and how much interest you pay over time. The Six Mortgage Payment Frequencies Most lenders offer the following payment options: Monthly – 12 payments per year Semi-monthly – 24 payments per year Bi-weekly – 26 payments per year Weekly – 52 payments per year Accelerated bi-weekly – 26 payments per year Accelerated weekly – 52 payments per year Standard Payment Frequencies The first four options are designed to align with how you get paid. For example: Paid monthly? Monthly mortgage payments may make sense. Paid every two weeks? Bi-weekly payments can align nicely with your cash flow. With these standard options, regardless of how often you pay, the total amount paid over the year is the same —it’s simply divided into more frequent payments. What Makes “Accelerated” Payments Different Accelerated payments work differently—and this is where the real savings happen. With accelerated bi-weekly or accelerated weekly payments, you’re paying a slightly higher amount each time. That extra money goes directly toward reducing your mortgage principal, which lowers the interest you’ll pay over the life of the mortgage. A Simple Example Let’s assume a $1,000 monthly mortgage payment: Monthly: $1,000 once per month = $12,000 per year Semi-monthly: $500 twice per month = $12,000 per year Bi-weekly: $1,000 × 12 ÷ 26 = $461.54 every two weeks = $12,000 per year Accelerated bi-weekly: $1,000 ÷ 2 = $500 every two weeks = $13,000 per year With accelerated bi-weekly payments, you effectively make two extra payments per year without having to think about it. Those extra payments reduce your principal faster, which lowers interest costs over time. Accelerated weekly payments work the same way—you just make smaller payments more frequently. Why This Matters Long Term While it’s difficult to calculate exact savings due to variables like interest rates, terms, and amortization changes, maintaining an accelerated payment schedule over the life of your mortgage can reduce your amortization by up to three years and save a significant amount of interest. The Bottom Line Accelerated payments are a simple, automatic way to lower your overall cost of borrowing—without needing to make lump-sum payments or drastically change your budget. If you’d like to see how different payment frequencies would impact your mortgage specifically, feel free to reach out anytime. I’d be happy to walk through the numbers with you and help you choose the option that fits your goals.
You’ve outgrown your current home. It no longer fits your life, so moving makes sense. And you’re not interested in juggling two properties. Selling first and buying something new feels like the right move. Ideally, you want possession of the new home before leaving the old one. That overlap makes moving easier, reduces stress, and gives you time to paint, renovate, or settle in before the boxes arrive. But there’s a common challenge. What if the down payment for your next home is tied up in the equity of the one you’re selling? That’s where bridge financing comes in. How bridge financing works Bridge financing temporarily unlocks equity from your current home once it has a firm sale . It bridges the gap between selling your existing property and purchasing your next one, allowing you to use that equity toward your down payment. What about competitive markets? In a hot market, a strong offer often means a larger deposit . If you don’t have that cash sitting in your account, but you do have equity, a deposit loan can help you compete with confidence. The non-negotiable requirement To qualify for bridge financing or a deposit loan, your current home must have a firm, unconditional sale . No firm sale = no bridge or deposit loan. Lenders need certainty to calculate available equity and manage risk. Bottom line A firm sale is the key that unlocks bridge financing and deposit loans. If you’re planning a move and want to understand how these options could work for you, let’s talk. I’m always happy to walk you through your options and help you plan your next step with confidence.
