For most married couples, the family home is their most valuable asset. Questions often arise
about the family home when spouses separate such as who gets the house after divorce and
who is responsible for the mortgage payments before all financial matters are finally resolved.
Read on for information about what happens to a mortgage after spouses separate.
Ensure the mortgage gets paid
Regardless of which spouse continues to live in the home, it is usually prudent advice to keep
making the mortgage payments. Sometimes the spouse who moves out refuses to pay their
share of the mortgage payment. This may occur because of their anger, lack of funds or quite
simply their failure to turn their mind to this issue in the midst of the turmoil that ensues after
a separation. You know that your lender can force the sale of your home if payments are
missed.
You should avoid this at all costs as this will likely seriously damage your credit rating.
The long and short of it is if your name is on the mortgage, keep making sure the mortgage is
paid in full until the property is sold, the mortgage is discharged, a property settlement is
reached or a Judge makes a specific order directing who is to pay the mortgage. If you pay
more than your fair share of the mortgage after separation, this can be remedied in the final
settlement or court order dealing with asset division.
Written agreements concerning paying mortgage after divorce
Did you and your spouse sign a marriage contract, cohabitation agreement, or prenuptial
agreement that addresses responsibility for the mortgage after separation? A legally
enforceable agreement of that type can avoid disputes and provide much needed clarity during
an already stressful time.
If you do not already have an agreement in place, it is not too late. You and your spouse can
negotiate a separation agreement regarding who will pay the mortgage, who will live in the
home and for how long, who is responsible for the upkeep and maintenance of the house, who
will pay for any necessary repairs, or how you will ultimately deal with the home in your separation.
A skilled family lawyer can help you negotiate and draft a legally binding separation agreement
that addresses your rights and responsibilities with respect to the home and the existing
mortgage.
Options for your mortgage after separation
There are several options for dealing with the family home and mortgage after separation. The
option that is right for you will depend on several factors including your finances, needs and
wants, the value of your home and the remaining balance owing on your mortgage. An
experienced family lawyer together with your mortgage broker can help you determine which
of the options below are best in your circumstances:
1. Sell the home. This may be the preferred option if neither spouse wants to continue living
in the jointly owned home or it may be the only option if neither spouse can afford to take
over the mortgage and payout a share of the net equity in the home to their spouse.
When the home is sold, the spouses equally share the net proceeds unless there is an agreement
or court order that says otherwise. Net proceeds are what is left after paying the outstanding mortgage balance, any outstanding interest and penalties, real estate commission and legal fees. You can then use your share of the net proceeds to rent or buy a new home.
If the home needs to be listed and sold before you have an agreement or court order in
place, the net proceeds can be held in a trust account by agreement or Court Order until
there is a resolution with respect to dividing all other family property and debt.
2. Spousal buyout. If one spouse wants to keep the home, they may be able to buy out the
other spouse’s interest. The spouses will need to agree on the value of the home for this to
occur. A divorce lawyer can assist if you and your spouse dispute the home’s value by
suggesting the name of a reputable property appraiser. The spouse keeping the home can
use other funds or assets to satisfy the buyout. They may also be able to seek lump sum
spousal support from the other spouse which would in effect lower the buy out amount for
the spouse retaining the home.
If the spouse who wants to keep the home does not have available funds to buy the other
spouse out, they will need to refinance. Refinancing is only possible if the spouse qualifies
for the mortgage on a single income or if there is enough equity in the home to borrow
against it or if they have an approved co-signer or guarantor.
3. Retain the home and continue splitting mortgage payments. This option is certainly not for
everyone but it is open to the spouses to keep the property and continue sharing the
mortgage and expenses. Both spouses may continue living in the home, both may move out
and rent the property to a third party as a mutual investment property or one spouse may
stay in the home until some agreed upon date such as the expiration of the mortgage term,
a change in the housing market or the time when the children have graduated from school.
Living arrangements, rights, and responsibilities should be carefully addressed in a written
agreement between the spouses. Remember that the warning discussed above continues to
apply: if one spouse stops contributing to the mortgage, it can hurt both spouses. If you are
considering retaining the home and mortgage together with your ex, you have to be
prepared to step in to take full responsibility for the monthly mortgage payments if your
spouse misses any payments if you want to preserve your credit rating and avoid bank
foreclosure proceedings.
Do you have questions about paying mortgage after separation?
If you are going through a separation and want to know how to deal with your mortgage, joint
home ownership and property division during divorce, you may wish to reach out for legal
advice from a skilled BC divorce lawyer. If you are concerned that your spouse may try to sell
the property without your knowledge or if you are not on title to the property or the mortgage,
contact Valerie as soon as possible to discuss options for protecting your interest in the family
home.
No matter what family law questions or issues you might be facing, you will receive practical,
relevant legal advice about your personal situation from Valerie Little.
Valerie M. Little Law Corporation is centrally located in New Westminster and serves all area
throughout Metro Vancouver including Burnaby, Port Moody, Maple Ridge, Coquitlam, Port
Coquitlam, Vancouver, North Vancouver, West Vancouver, Squamish, Whistler, Richmond,
Surrey, Cloverdale, Delta and Langley.
To schedule your confidential appointment, call 604-526-3333 or email her today.