Sunday, April 5, 2015

What Happens to Your Mortgage After Divorce

A study conducted by the Vanier Institute of the Family reported that about 4 in 10 first marriages in Canada would end in divorce by the 30th anniversary. Further, according to Statistics Canada, about 38 per cent of all marriages taking place in 2004 will have ended in divorce by 2035.[1]  The same Vanier Institute of the Family listed the top 8 reasons why people marry and the top 5 reasons why people separate or divorce.  The number 5 reason for marrying was “financial security.” [1] Why bring up these gloomy statistics?

If one of the reasons why people choose to marry is for financial security, then separation and divorce can be the undoing of that financial security.  Consider the advantage of two people combining their financial assets to purchase a house together: more income may give them the option of a bigger house, better neighbourhood, and a wider range of financing and mortgage options.  If they have stretched the limits of their combined incomes and taken on a high debt load to finance their forever home, should they end up divorcing, they may find themselves financially farther behind where they were when they got married. But it does not have to be all bad to deal with your "mortgage and finances after divorce."  You have choices and options, many of which are uncomplicated, some more complex.

So what does a mortgage look like after divorce?  Quite simply, IT DEPENDS.  Each situation is unique; there are many factors that come into play.  Some of the main factors to consider regarding mortgage decisions post separation are:
  • the remaining principle on the mortgage compared to the property value;
  • other combined debts;
  • the income of your new family household; and
  • your short and long term financial goals.

As home owners if you find yourself in a divorce, you may HAVE to sell the matrimonial house, or you may choose to down size or you may be able to take advantage of the lending situation and care for yourself financially.  As difficult as divorce is, you will need to have an exit strategy as soon as possible.  The worlds of real estate and mortgages are complex, overwhelming and constantly changing.  The questions and possibilities are endless! You need to work with a trusted mortgage agent who will guide you through your options to deal with your mortgage after divorce, help design an exit plan which maximizes your potential and takes advantage of the best mortgage products available at that point in time.   You may find yourself emotionally and economically stressed, so working with a trusted mortgage professional will alleviate some of the stress and allow you to move forward more quickly with your life. 

When I separated, I thought I was going to have to sell my house because there was a large mortgage on the house.  I was able to create stability for my kids and myself in a time of major change.  This stability was priceless.  If you find yourself in a similar situation, find a mortgage agent and create an exit plan.  There is good financial and personal life after divorce.

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