Divorce mortgages in Canada

Recently the government changed the guidelines for lenders in Canada to allow a maximum refinance of only 80% of the value of your home – so how does this affect clients who are being divorced and splitting their home and assets?

Great question, in the case of divorce mortgages in Canada, the government has allowed special guidelines to help you.

Unfortunately in many divorce situations the home does not have enough equity if we are limited to an 80% loan to value refinance to equally repay one party their part of the home equity while allowing the other to keep the equity and remain in the home.  For example, assuming the divorcing couple had no other assets to deal with, their home would have to have a loan to value of 60% or less.  In real numbers, if they had a $300 000 home, their mortgage would have to be $180 000 or less in order to afford the clients with and equitable split.  In this case the client who is keeping the home would retain the $60 000 in equity and would then obtain a new mortgage for $240 000 in order to repay the other party the $60 000 in cash.

 And now for the good news….

We now have a unique program and exemption from the government insurers to treat these divorce mortgages and buyouts as purchases and thereby allowing us to approve divorce mortgage clients under the same requirements as if they were purchasing the home from the previous spouse.  The special advantage is that we are able to use the home equity they receive in the separation as the down payment.  As a result of this unique program, for divorce mortgages in Canada we are able to use as little as 5% down payment in the form of home equity for the home buyout.   For example assuming our clients own a $300 000 home and they have a mortgage of $270 000, with $30 000 in total equity.  We are able to use the split of that equity: $15 000 for the down payment for the person who is keeping the house, while the other party receives the $15 000 in cash as a buyout through the new mortgage financing.

As always please feel free to contact me with any questions or if you would like assistance with your divorce mortgages in Canada.

All the best!

Rylan Hahn

Managing Broker

The Mortgage Centre – Roost Mortgage

PH: 403-802-7201