Breaking up is hard to do! Like REALLY hard!
via Tom Copeland
Sadly the breakdown of a relationship can often become a battle royale where nobody comes out a winner....Every situation is different but here are a few things I learned during a recent transaction helping the "Mrs" move on after selling the matrimonial home:
1. Proceeds from the sale of your home...how come you're broke & homeless now? Your Ex can tie up those funds by requesting they be put into trust until all issues related to the disposition of assets are resolved...leaving you with no access to funds for a downpayment on your next home. If you can't buy right away then you may need to find a short-term rental or move in with family for however long it takes for your case to make its way through the courts.
2.Your mortgage pre-approval ....not worth the paper it's written on? Even if your support payments have been nailed down & agreed to by both parties you may have to go to an alternative lender in order to get a mortgage because none of the "big" banks will approve you without a history of those support payments being made.
- One of the things that is looked at during the approval process is the ratio of your income to the support payments you will be receiving...the concern being that if your Ex doesn't make the payments, can you afford the mortgage on your own? You can apply to the provincial Family Responsibility Office (FRO) to ensure that you receive your support payments when you're supposed to.
- An alternative or "B" lender will charge you a higher interest rate to assume the greater risk so it's best to go with the shortest term possible...a year could work but some banks want to see a minimum of 2 years support payment history. A higher interest rate, typically 1-1.5% more than what an "A" lender is offering, for a short period of time can be worth it if it allows you to get settled in a new place right away.
- Once you get a mortgage commitment, there will be a number of conditions you will have to meet by closing day in order to have your purchase funded & one of those is a binding separation agreement.
3. Mortgage Insurance...the final frontier. No doubt you already know that you need a minimum of 5% down to purchase a home but if you have less than 20% to put down on your next place then you will have the additional hurdle of getting Mortgage Insurance approval for what's considered a high ratio mortgage.
- We have 3 insurers here in Canada, CMHC, Genworth Canada & Canada Guaranty. The only way to get this approval is through a "live" deal which means you have to have an accepted conditional offer to put through the underwriting process. This is where it's key to have a financing condition in your offer! It IS possible to get approval from a lender but have the deal die when trying to insure it.
- Your best bets to get through this process are good credit, have your debt service ratios in line (this will usually be addressed in pre-qualifying) & work with a mortgage broker who is experienced in putting these deals together. A mortgage broker has the ability to go through hundreds of lenders to get you what you need including working their own professional relationships to your advantage.
- My go-to broker is Al Smith at Mortgage Alliance he knows his stuff & he really went to the mat for our mutual client & got her what she needed, when she needed it!
4. Bridge financing...good luck with that! It's such a civilized & inexpensive way to buy & sell these days by literally buying yourself a few days grace between moving out of your old home & into your new one. But did you know that you will need your Ex to sign off on that bridge contract? If your mortgage commitment has a condition of downpayment funds coming from the proceeds of the sale of your matrimonial home then, yes, you will need them to sign because they have an "interest" in the matrimonial home. On the one hand it makes sense in terms of the lender's risk management but from a "human" standpoint it's frustrating because if you're going through a nasty break up you're likely going to have to make your closing dates the same day because your Ex's priority is probably not about helping make your life easier, right?
5. Get it in writing...EVERY. LITTLE. THING! I'm a big believer in maximizing the value of what's most likely your biggest asset so when I come in to do an evaluation on your home I will give you ranges for "As-Is" condition & "Improved" condition. If you choose to go ahead & make improvements prior to listing your home for sale then I can't stress enough the importance of putting in writing who will be paying, how much & when & then having all parties sign off on it. Work orders, estimates, warranties or any other related documentation should be in both names if the cost is to be shared. I'd even suggest having the agreement be witnessed. Not putting your agreement in writing can leave one of you holding the bag...unpaid tradespeople can take you to small claims court, put a lien on your property or send your debt to a collection agency. Avoid the headaches & possible damage to your credit & get it in writing!
So there you have it! My top 5 takeaways for navigating the real estate side of a break up...
Sadly January is know as "Divorce Month" in legal circles as many couples decide to "get through" the holidays & deal with it all in the New Year. If it's something you've been considering then I've included some resources below to get you started.
Step 1...Get some legal advice!
- The Bracken Family Law Firm is a good place to start. A complimentary consultation will give you a better idea of what's involved in the process.
Step 2...Know your numbers!
- Contact me to get an evaluation done on your home along with a complimentary customized worksheet to help you determine the costs involved in selling & your equity position
- Contact a Mortgage professional to better understand which option makes the most sense for your future housing, buying or renting.
Following these steps should help you figure out what makes the most sense for YOU & I wish you the best in your journey.
Additional Helpful Links:
The Office of the Children's Lawyer (OCL) - For child custody/access issues
Families First Mediation - Mediation services is another option to consider
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