Here are a few options to consider when thinking about what to do with your home in a divorce.

Buy Out Your Ex With A Spousal Buyout Mortgage

Buying the home from your former partner is one of the most common scenarios that homeowners ask about when going through a separation or divorce in B.C. 

It’s likely that you share ownership in your home and that one of you would like to stay. This means that the person staying must typically buy the other person out by giving them their portion of the home’s equity.  To calculate home equity, you simply subtract the amount owing on the home from the current market value.  

For example: $1,000,000 home value – $500,000 mortgage = $500,000 home equity.

How To Refinance Your Home For A Spousal Buyout

1.Home Evaluation: speak with a licensed and reputable Realtor in your area and request a free Current Market Evaluation.  This will serve two purposes:  The first and most obvious one being that you and your ex husband or ex wife now know the value of your home from which to work from.  The second purpose will set a realistic expectation of a potential sale price if the spousal mortgage buyout falls through.

2.Speak With A Mortgage Broker: engage with a mortgage broker to determine if you qualify to refinance your mortgage for a spousal buy out.  Remember, you are increasing the existing mortgage amount for money owed to your ex spouse.  As such, the mortgage payment will increase and the ability to qualify for the mortgage must be satisfied.

3.Hire A Family Law Lawyer: It’s important for both you and your former partner to seek the professional guidance and expertise of a Family Law Lawyer in BC.  They will help both of you to agree on the division of assets and to finalize a Separation Agreement confirming the same.  A mortgage lender will require a fully executed Separation Agreement as part of the mortgage approval process. 

4.Finalize Your Mortgage Approval: the last and final step is to work with your Mortgage Broker in satisfying all of the mortgage lender’s conditions.  Once complete, you will sign the final papers with a lawyer or notary where the new mortgage will be set into place and your former husband or wife will receive their portion of the funds.

Costs To Consider When Buying Out Your Spouse From The Home

Whether you decide to buyout your ex or sell the home, there will be a few unavoidable costs.

1.Family Law Lawyer: it’s not mandatory to hire a lawyer but it is encouraged in most cases. The cost of a lawyer can vary greatly.  Some law offices offer a flat fee service while others charge by the hour.  The low-end usually starts at $2000 and the high-end is unlimited.  Costs typically escalate quickly when couple cannot agree on a specific topic such as child support, division of assets, division of debt, etc.

2.Mortgage Penalty: a mortgage penalty may be incurred in both selling and refinancing options.  It’s likely that the original mortgage term will be adjusted or paid out early, triggering a mortgage penalty.

3.Real Estate Commission: Selling your home can be expensive and of the largest bills sometimes being the commission of you real estate agent.  In BC, the average real estate commission is 7% of the first $100k and 2%-3% of the remaining sale price.

There still remain additional and smaller costs that we did not cover here but the aforementioned are the major expenses to note. 

Cohabitate Instead Of Refinancing Or Selling

Another path to consider during a separation or divorce is to continue co-owing and cohabitating. This is known as a “deferred sale” and can work when you and spouse are amicable.

Reasons why someone may choose to defer the sale of their home is to keep the family unit together while children attend school, avoid mortgage penalties, allow your value to increase, and to help each other out buy continuing to share expenses.  

Co-owning might sound nice, especially when you have of other life changes going on. But it means you and your ex must agree on things like mortgage payments, home maintenance, insurance, taxes, and child expenses. 

If you can work together and delay the sale of your home, then both of you split the costs and any increase in the home’s value. When the time’s right, you’re in a better spot to make a sale that benefits for both of you and ultimately your family.

If cohabitating and co-owning your home sounds agreeable to you and your ex, it’s suggested that you speak with a lawyer who can speak with you about a cohabitation agreement and any other details and help to protect both of your interests.

Sell Your Home

If refinancing to buyout your spouse or cohabitating are not desirable, then we are left with selling your home and splitting the proceeds.  This can be the “cleanest” method to parting ways.  A realtor will help to explain the current market value of your home and outline a marketing plan to help attract as many potential buyers as possible.  

Speaking with a lawyer is also still advisable.  They will help you to agree on the division of your assets and outline what each of you are entitled too as per BC and Canadian law.

Once finalized, it’s time to think about your next living arrangement.  Some will opt to rent until they get back on their feet while others apply for a mortgage pre-approval with a BC Mortgage Broker with the goal of buying their own home.