4 things mortgage brokers need to renegotiate a mortgage

4 things mortgage brokers need to renegotiate a mortgage

A home is usually the biggest asset a couple has to consider when going through a divorce. Navigating the complex world of mortgages is not an easy task and knowing how to deal with a home when it comes to reaching an equitable settlement can be complex. Mortgage brokers are your best ally when it comes to dealing with the intricacies of property ownership, divorce and figuring out the best option when it comes to your home. Here are 4 things a mortgage broker will need to complete this process.

  • A written and executed separation agreement signed by both parties

A separation agreement will break down what the division of assets will be. It will also lay out any ongoing financial responsibilities for either parties like child or spousal support. This has to be taken into consideration when it comes to the affordability of the mortgage for the spouse that is keeping the house. The separation needs to be finalized meaning that it must be the final document that has been agreed upon by both parties. Separation agreements that are in the process of being negotiated are of no use to a mortgage broker as it will not deliver an accurate picture of each of the spouses’ financial responsibilities moving forward. That being said, a mortgage broker does not need the finished separation agreement to start their work. It just needs to be finalized before any mortgage funds can be issued

  • A signed purchase agreement

This is necessary because when one spouse takes full possession of the house it is considered a purchase transaction. If Jane is keeping the house, she is purchasing the home from John and herself whose names were originally on the mortgage jointly.

  • An appraisal of the property

In many cases an assessment of the property by an appraiser is needed to make sure the purchase price decided on by the lawyers is accurate. This is because potential lenders don’t want to give $400,000 for a house that is only worth $350,000. They want to be sure that if you default on your mortgage they can get their money back by selling the property. This is something you can let your mortgage broker take care of because they will know what the requirements are for each of the lenders they work with.

  • Proof of employment and income for the spouse keeping the property

The income of the person keeping the property needs to be noted to make sure they can afford to upkeep the home. Whether a person is paid on an hourly basis, an annual salary or are self employed are all variables that need to be accounted for. Federally-mandated guidelines establish how much of a person’s gross income (or net income if you are self employed) can go towards the upkeep of the house. This is called gross debt and includes principal, interest on the mortgage, property taxes and heat. Total debt also needs to be taken into account and this includes child and spousal support, car loans, credit cards and lines of credit. For a person with good credit 35 per cent of their income can go towards shelter costs and 42 per cent can go towards shelter costs plus all other debts. In certain circumstances there may be some flexibility in these ratios, but not much.

A mortgage agent can guide you through this process and help secure the mortgage that is right for you going forward. They understand the intricacies of mortgages and will help you manage the most valuable asset in your life with as much ease as possible while going through something as difficult as the divorce process.

 

About Tom Insley

Tom has been in the financial services industry since 1996. As a former financial planner, he has the skills to work with your other financial professionals (financial advisors, accountants, insurance specialists, etc.) to integrate your mortgage into your larger overall financial strategy. As a mortgage specialist, he is committed to helping match people with not only the best possible rate, but the best possible mortgage. He is involved in several local charities including the CHEO Teddy Bear Picnic, Relay for Life, the Alzheimer Society, the Ontario March of the Dimes and the Canadian Diabetes Association. He is also the two term president of the Community Association of the village of North Gower.