When going through a divorce or separation there are many things to consider, including where you will live after separating from your partner. If you own a home the situation can be complex as you must take into consideration the affordability of the home, children, the equalization process, other debts and of course your own feelings when it comes to where you live.
With all this to consider it is a great idea to work with an experienced mortgage specialist to assess your situation and present you with options and advice on how to put yourself in the best position possible that meets your wants and needs. Here are a few key components that a mortgage specialist will help you pull together that are essential in figuring out your living arrangement after a divorce or separation.
Check your credit rating
It is important to know your credit score and historical information about your credit that can be obtained from a credit bureau such as Equifax or Transunion. This is something that everyone should check at least yearly as there may be errors or things about your credit that you aren’t aware of. If there is a surprise with your credit such as a collection or liabilities that haven’t been updated, checking in advance allows you some time to do repairs. Some minor issues can be repaired relatively quickly, while others may take a bit longer.
Assess your income
Assessment of your income is also important. Some income (part time or casual work) is more difficult to prove while others require only a recent pay stub and a T4 or employment letter. If you are self-employed you require two to three years of T1 Generals and Notice of Assessments and not everyone has these on hand. Some people find themselves in a situation where they haven’t filed a tax return in years. This can be stressful when facing a divorce and looking at future accommodations. Discussing your requirements in advance and getting advice on prioritizing by a mortgage specialist gives you time to get your paperwork in order.
Evaluate your home
The value of the home is also important because when buying a new home or refinancing your family home due to a divorce you can borrow up to 95 per cent of the appraised value subject to affordability guidelines set by the government. These guidelines are more flexible when you are borrowing less than 80 per cent of the value. The bank will sometimes allow your payments to be a higher percentage of your income than the government guidelines stipulate. However, if more than 80 per cent of the value is borrowed, the guidelines are not negotiable. It is also important to note that an appraisal done for the purposes of a divorce will not necessarily show the same value as an appraisal done for the bank for financing. Let a mortgage specialist order the assessment so you don’t end paying for an appraisal you can’t use.
Consider other financial liabilities
Finally, other financial liabilities are important to consider. It may be advantageous to pay off some existing debts with the new mortgage, if possible. Support payments to be paid or received must also be considered in your total debt ratio. The separation agreement, signed by both parties, is an important document in your mortgage application because it shows support payments, responsibility for joint debts and division of assets, including the home.
When considering or going through a divorce, it is important to discuss your home financing needs as early as possible with an experienced mortgage professional that you trust. A mortgage specialist can help you pull all the pieces together and give you a clear path towards finding a living situation that works best for you and your situation.