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What does it take to get 95% ltv spousal separation mortgage?

by Dennis C.
(Burlington, Ontario)

I have been told that I can take out a mortgage on my house at 95% of it's worth when I'm separating from my wife. How does this work and what will happen to my house if I get turned down for a loan because of bad credit.

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Jan 17, 2015
About getting a 95% ltv spousal separation mortgage
by: Marie Copeland, Mortgage Broker and Owner of Axcess Mortgage and Loans Financing

Dennis thank you for your questions about a spousal buyout mortgage once you contact your divorce lawyer or start divorce mediation.

Yes, you can get a spousal separation or a spousal buy-out mortgage by refinancing your matrimonial home up to 95% of appraised value and raise money to pay out your spouse.

If your house appraises at $500,000 or less, and you qualify for an insured mortgage, you can get up to 95% of property value.

If your home appraises over $500,000, you can get up to 95% of the first $500,000 and up to 90% of the remaining value up to $1,000,000.

95% ltv spousal separation mortgage is a CMHC insured home loan and although technically it is a refinance - it is treated as your purchase of the spousal home.

Before you can start this refinancing spousal buyout process you will need a Separation Agreement between you and your wife from your divorce lawyer or divorce mediation consultant.

Just like any other insured mortgage you will need to qualify on the quality of your credit and income vs. expenses ratios, taking into consideration any spousal or child support payments as outlined in your Separation Agreement.

If you have an income shortfall because you now have to include any support payments as an expense, you can add a guarantor on title with you to supplement this income.

You will also need an Agreement of Purchase between you and your spouse to buy out her share of the matrimonial home - again, this would be detailed in your Separation Agreement.

Now to your second question "What will happen to my house if I get turned down because of bad credit"

Even if you have bad credit there may be options for you too, as long as there is enough income to meet the alternate lenders' debt service ratios - and, enough equity to meet that lender's loan to value requirements.

Each situation is unique and I would have to assess it individually.

But in the most part there are options such as bad credit mortgages, private mortgages, interest only 2nd mortgage as well as adding a strong guarantor to title.

Of course if all options are exhausted and you don't qualify for any alternate mortgage - the answer is that you will have to sell your home and divide any available equity according to the terms of your Separation Agreement.

At that point, if you have money in hand from the division of your matrimonial assets, you may be able to qualify for a different and less expensive property.

I can help you resolve this situation properly by taking your application, pulling your credit and assessing your income and terms of your Separation Agreement.

I hope this helps.

Marie Copeland, FSU, Hamilton Mortgage Broker, also arranging Burlington mortgages and throughout Ontario including Toronto and Niagara areas.

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