As we all know, life is full of changes, challenges and the occasional bump in the road. Getting divorced, for example, is one change that many individuals experience on their journey, and it certainly is not usually an easy process to go through.
Not only are there emotional challenges involved in separating from your spouse, there are also the financial challenges and implications to consider, particularly if you currently own a house and have a mortgage with your partner.
If you do own a house and carry a mortgage with your soon-to-be ex, you may be wondering what options are available and what your next steps should be. By law, both parties have an equal right to stay in the home if it is jointly owned. Additionally, neither partner is allowed to sell, rent or mortgage the home without agreement from the other partner.
Sell or stay?
Option One: Stay
The first question that you and your former partner should consider is whether you want to put your home up for sale, or if one of you would like to stay and assume the mortgage. Keep in mind that there are a few important factors to consider before you reach your final sell or stay decision.
If you are considering staying, remember that in addition to being responsible for the full mortgage amount, you will also be fully responsible for paying all of the normal, everyday expenses and bills as well. As such, it’s important to determine whether you are financially capable of handling all these expenses on your own.
If you do feel that you are able to handle these costs and want to stay in your current home, you’ll need to buy your partner out of their half with a lump sum that equals the current equity in your home. Also, you may need to refinance your mortgage. Be aware, new mortgage rules and the new mortgage stress test may mean that it’s a little harder to qualify for a mortgage loan. Even the lender that you are currently working with may not approve you for mortgage refinancing, particularly if there isn’t much equity built up in the home.
Option Two: Sell
If you feel that selling is a better financial option for both parties, there are also a few things that you’ll need to consider. Remember, depending on a few variables like real estate and market trends, as well as the current condition of your home, your home may not sell right away. This means that you both may need to live in the home together for an extended period of time, which could be tricky if the separation is not entirely amicable. Alternately, if one person moves out pending the sale of the home, this can be an added expense.
In addition to the length of time needed to sell your home, you may also need to break your mortgage. Depending on your lender and the conditions of your mortgage loan, breaking your mortgage could result in financial penalties, so it’s best to be aware of this fact before you make your final decision to sell.
When going through a divorce or separation, dealing with the final implications (including your mortgage) can be difficult; it’s good to know your options as well as have sound advice. As an experienced mortgage broker working in Barrie, I’ve helped many clients navigate through this process and find the mortgage solution that helps them get back on their feet. If you are currently going through a divorce or separation, connect with me today at (705) 315-0516 to see how I can help with your mortgage needs.