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Feb 21 How To Deal With Your Mortgage In The Case of Divorce

Posted by: AdminS

On the Thursday, February 21st edition of CP24’s ‘Hot Property’, MonsterMortgage.ca mortgage expert Roy Cocciollo covers the topic of divorce in relation to your mortgage.

While divorce is something that no one hopes for, sometimes these events do occur, and Canadians find themselves needing to know more about what happens to their mortgage in the case of divorce.

The most important concept when dealing with your mortgage in Canada during a divorce is to protect yourself.

Here are some helpful tips when dealing with divorce in Canada when it comes to your mortgage:

  • Remember Protect yourself – before you can take your spouse off your mortgage one of two things must happen:

a. You must agree to terms and have either a formal separation agreement or a notarized written agreement in place that outlines your asset division; or

b. Your spouse is willing to sign and get a release acknowledging that she/he has received the asset buy out and has no other obligations to the home

c. If your spouse is uncooperative you can get a court order for them to comply with your demands but this is very rare.

  • Some people prefer to clear things up before an actual written agreement is put in place.

For this to happen, your spouse has to sign off on everything once the new mortgage documents are prepared (assuming you are purchasing a new home). It is advisable that you should retain independent legal advice so you understand your rights.

  • If both parties are on the existing mortgage and on title, they will both be responsible for the payment of the mortgage and all taxes until one of them is removed. Not paying the mortgage and property taxes (regardless of whether you are paying your half or not) will hurt both your credit scores and risks having the bank foreclose on your home.

  • If you are buying another home and are still on the mortgage of the matrimonial home:

a. Then the old mortgage must be listed as one of your debts against your new mortgage. This may hinder your ability to qualify for another mortgage.

b. Your credit score may also be impacted especially if you share other debts with your spouse i.e., credit cards. If your spouse doesn’t pay their share (and you don’t cover those costs) both your credit scores will be impacted.

c. If your mortgage falls into arrears (regardless of whether you are covering your share or not) when getting a new mortgage the new lender may want to see a mortgage rating and if it is poor they may decline your new mortgage.

  • If a spouse remains in the matrimonial house it is considered a “spousal transfer” so you will not need to pay any land transfer tax unless you need to add a secondary applicant to the mortgage to qualify.

If you have any more questions regarding your divorce and how it relates to your mortgage in Canada, do not hesitate to contact me at roy@monstermortgage.ca or to fill out a contact request.

Also, tune into CP24’s ‘Hot Property’ every Thursday night at 7PM and you can have your mortgage question answered live on-air. If you’ve missed an episode, and need to know the latest on mortgages in Canada, you can watch previous shows online here.

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