Please be aware of the following high-ratio mortgage finance program as it relates to potential clients.
Program Application: In situations where two parties are on land title to a property and in a relationship breakdown, where one party desires to keep the existing property, please be aware there are mortgage financing options that may enable your client to:
Increase their access to equity/cash to payout the other spouse’s interest.
Extract equity to payoff existing joint debts of the applicant to facilitate mortgage qualification.
Avoid disruption of being forced to sell and move.
Program also applies to common-law partnerships, joint family purchases, or similar where the relationship is breaking down and the parties desire to financially separate their affairs.
Solution: As mortgage professionals, we have a number of lenders that will provide mortgage financing for the spouse-to-stay up to 95% Loan-to-Value (LTV). The financing is structured as a CMHC-insured purchase. This is different from refinancing, which is limited to 80% LTV, or from Release of Covenant.
Criteria: A successful mortgage application and approval will require the following:
Both parties must be on the property title prior to the legal separation.
Finalized separation agreement in advance or in coincidence.
Offer to purchase from one spouse to the other.
Appraisal confirming the current property value.
Spouse-to-stay MUST be able to mortgage-qualify under standard mortgage lending criteria (income, credit, debt servicing, etc.)
Spouse-to-go must be removed from the mortgage and title at funding.
Example: $500,000 home value with existing $400,000 mortgage and $25,000 in joint debts. Parties agree to $50K cash for spouse-to-go from remaining equity. Refinance to 95% LTV yields $475K less $400K existing mortgage payout, less $50K for spouse-to-go, with $25K left for joint debt settlement.
Please note, it is very important for either party to determine their present and future mortgage options including dos and don’ts as part of the financial separation process and before signing off on any agreement.
I would be happy to provide you, your colleagues, or your clients with a free consultation on these matters at any time.