Aside from the emotions involved with a separation, there are several things to consider and act upon relative to your current mortgage. Now that your separation agreement has been finalized, some action likely needs to be taken. The main questions that need to be addressed are

1) if you will be buying a new property

2) staying in the existing one In the event of a new Purchase, here are a few areas to consider:

Will you be keeping or selling the existing house?

What can you afford relative to your current financial situation?

Will one of you be coming off title (should either of you keep the existing residence)? How will you secure a down payment for the new property?

In the event of a Refinance, here are a few areas to consider:

Can the equity in the property be used to consolidate joint liabilities?

Is there enough to provide a payout, if there is one in question to the other party?

By working with a mortgage agent such as myself, I can help you navigate whatever scenario best applies to your situation all while coaching you about how to maintain a positive credit rating. A traditional Refinance would limit the access to the equity in your property to 80% of your current homes value (minus the existing mortgage). I have the ability to work with you and may be able to access your equity up to 95% of the value of your home (minus the existing mortgage), all while maintaining great rates. I can only sympathize that this is a difficult period in your life. I have help several individuals in your exact situation get back on track.

Please give me a call today so that we can discuss your current situation and explore all options to help you move on with your life.

Spousal Buyout Program GOING THROUGH A SEPARATION BUT WANT TO KEEP YOUR HOME? Separating from a spouse is emotionally draining and this is often compounded when the largest asset in many relationships, the matrimonial home, is a factor. Sometimes, both parties want to sell and buy new homes but other times, one person may want to keep the home and pay their Ex out for his/her share of the equity. By law in Canada, you can refinance your home up to 80% of it’s value. As the amount that can be taken out may not be enough to “buy-out” the other spouse, pay off joint debts, AND keep the minimum 20% equity required in their home, this can cause an issue. But not to fret – Another option is available! Through the SPOUSAL BUYOUT PROGRAM, if you are going through a Separation or Divorce and have a Separation Agreement, you can increase your loan amount up to 95% of your home’s value! (NOTE: A version of this option known as a “Dissolution of Relationship” is also available for siblings, friends, or other forms of “joint ownership” – Contact me to learn more!) STEPS: SEPARATION AGREEMENT: It is imperative to speak with a Mortgage Broker early on in this process as your assets and debts may need to be noted in your Separation Agreement in a very specific way (example – car loans or Line of Credits may need to be noted as “joint” marital debt). This, in turn, can prevent having to make amendments to your Separation Agreement, which can reduce the chances of incurring any additional legal fees. Let us ensure that the two of you can each make the best possible start on a new path. PRE-QUALIFICATION: The person staying in the home will need to QUALIFY for the full “purchase” on their own based on income, credit, etc. To ensure that you can debt service the full mortgage remaining, debts, and possible child/spousal support, request a mortgage consult and don’t forget to bring your Separation Agreement! APPRAISAL: In a sense, one spouse will be “selling” the home to the other. This allows you to go back to the rules where you only need 5% down to “buy”. However, as we all have opinions on what our house is “worth” and this will be a “non-arms length” transaction, Lenders will request a full appraisal to confirm the new “purchase price”. DOCUMENTS: Be aware that this will now be like a new purchase so we will need all the standard documents to confirm income, employment, and funds. Some of the documents we will ask for are your last 2 years of tax documents, latest pay statements, Letter of Employment, and ID. Also, an Offer to Purchase “selling” the home from both parties to the one spouse must be drafted, signed, and provided. Templates for an Offer to Purchase can be found here or here. CLOSING COSTS: Just as in a refinance, the “down payment” for this option comes from existing equity but you should also be prepared for a whole new set of legal fees, an appraisal, and any applicable prepayment penalties charged by the original mortgage Lender. Also, if your mortgage had originally been insured (ie. CMHC), then we may be able to get away with just a top up of your mortgage default insurance premium! This could result in thousands of dollars of savings. However, if the property had not previously been insured, mortgaging up to 95% will trigger a full insurance premium. EXTRAS: This option is only available for the MATRIMONIAL HOME and not investment properties; Both parties must be on Title PRIOR to the Spousal Buyout application; and We will need to follow exactly what shows on the Separation Agreement. Especially if we are wanting to “top up” a previous mortgage default insurance premium, the Agreement must spell out exactly how much in funds will be taken out for the fair division of marital assets. If after paying out your Ex there is still equity remaining that can be taken out (ie. if you were at 90% instead of 95% after paying out joint debts and matrimonial division), but this amount was not mentioned in the Separation Agreement, this extra amount cannot be taken out for personal use. If you are going through a separation or know someone who is, please call me at 780-919-0475. I can provide them what mortgage options they have available and prepare for any new financing you may require. I am also able to connect you to Real Estate Professionals that will provide the pre-listing service you require and advice you need to sell your home quickly.

As a first time home buyer, the process of purchasing a home can seem very daunting. From a financing standpoint, here are 10 common questions I hear from first time home buyers.

1. What’s your best rate? This is by far the most common question. Rate is a small part of your mortgage contract but its often the most talked about. People become “rate sensitive” when they hear their neighbour or co-worker got 2.49% and they want the same rate. Some lenders will dangle these low rates to entice you but don’t be fooled. The lowest rates almost always come with conditions such as high pre-payment penalties or quick 30 day closings. Is saving $15/month on your mortgage payment worth paying a penalty up to 9 times higher when you sell or need to refinance in 3 years? No broker or website can secure a rate without a full application and credit bureau.

2. What’s the maximum mortgage amount for which I can qualify? My suggestion is set a budget your comfortable with and let your Dominion Lending Centres mortgage professional tell you how much mortgage your budget allows. The two ratios used to determine how much mortgage you qualify for are the Gross Debt Service Ratio (GDS) & the Total Debt Service Ratio (TDS). Your GDS is composed of your new housing cost such as your mortgage payment (principal & interest), property taxes, heating costs and any strata fees. Your TDS includes your GDS as well as any other monthly liabilities such as car loans, credit card debts, lines of credit etc. Depending on your credit score, the maximum GDS/TDS ratio is 39/44. This means your GDS shouldn’t be more than 39% of your gross income. Your TDS shouldn’t be more than 44% of your gross income. If your gross income is $100,000/yr you could allocate $39,000/yr to GDS & $44,000/yr to TDS.

3. How much money do I need for a down payment? For owner-occupied homes, the minimum down payment required is 5% of the purchase price for homes under $500,000. For homes over $500,000 10% down payment is required on the amount over $500,000 up to $1M. Anything over $1M requires 20% down as a minimum. If you want to avoid CMHC mortgage insurance then 20% down payment or greater is needed. Any rental properties require a minimum of 20% down.

4. What happens if I don’t have the full down payment amount? As a first time home buyer you are eligible to use your RRSP as a form of down payment to a maximum of $25,000. Your RRSPs can be used without being taxed if you pay back within 15 years. Another popular option is a gifted down payment. A gift can come from an immediate family member to form part or all of your down payment. Some lenders will also allow a flex down program. This means you borrow the money from a line of credit and this loan is factored into your debt service ratios.

5. What will a lender look at when approving me for a mortgage? Generally speaking, the lender will want to look at your source of income, employment history, debt levels and repayment history and the actual property itself. Lenders want stability. By vetting and checking the above, the lenders feel confident you are able to make your mortgage payments and in the unlikely event you default, they know the property is marketable.

6. What’s better, fixed or variable rate? Not everyone qualifies for a variable rate because the qualification rate is currently 4.74% vs the 5 year fixed of 2.54%. That’s a big difference! Assuming you qualify for a variable, it boils down to risk tolerance and your plan for the property. Fixed rates give you stability over the term of your mortgage where a variable rate is tied to the prime rate, currently 2.70%. This means your mortgage payment could decrease or increase depending on what the Bank of Canada decides. Variable rates can save you thousands if you sell or refinance during your term. The standard penalty on a variable rate is 3 months interest. The penalty on a fixed rate is calculated using the interest rate differential and depending on your lender can sometimes be in the tens of thousands of dollars. Your Dominion Lending Centres mortgage professional can discuss all the differences and benefits for you.

7. What credit score do I need to qualify? Anything over 680 is considered AAA with most lenders. A score above 680 gives you access to all the discounted rates. If your score is below 680 there are options but often at higher interest rates.

8. What happens if my credit score isn’t great? Take action immediately to increase your credit score. If possible pay off all your debts on credit cards and lines of credit as this will increase your score substantially. Its a good idea to always pay your balance in full each month as this creates a pattern of positive repayment. Don’t take on anymore new debt such as car loans or new credit cards. Make sure everything is up to date meaning no overdue collections or old Telus or Rogers bills outstanding.

9. How much are closing costs? Closing costs vary but lenders typically want to see that you have 1.5% of the purchase price on hand for closing costs. If you bought a condo for $500,000 you’d need $7,500 for closing costs. This is only a guideline and costs vary. Closing costs will cover things like, inspections, lawyer fees, property transfer tax, appraisals, and title insurance.

10. How much will my mortgage payments be? Obviously this depends on your mortgage size, rate, amortization, repayment schedule, any CMHC insurance and if your lender is collecting your property taxes for you or not. My suggestion is stick to your budget! If you have any other questions, please feel free to contact Dominion Lending Centres – we are always happy to answer all your questions.