Having the Separation status does not mean you cannot go on with your life. The ability to purchase a home prior to divorce is most definitely possible.
- Prior Financial Obligations
- Seek Legal Counsel
- Applying for a Mortgage While Separated
- Common-Law Relationships
- Child Support and Alimony Obligations
- Assets Used to Purchase the New House
- Buying a House When Separated in Ontario
- The Laws
- What Can Happen
- Separate Property
- The Difficulties of Buying a House During Separation
- Separation Agreement
- Relying on the Right Professionals
Prior Financial Obligations
Before you can move on with the purchase of a new home while separated, you have to ensure all previous financial obligations have been fulfilled and resolved. An option might be to sell the matrimonial home if you have one and then it is done and over with.
Sometimes an ex- spouse will not remove their partner’s name from the mortgage. This could have a major impact on your ability to purchase another home. Having your name on another mortgage could legally hold you financially responsible. It may greatly interferes with obtaining another mortgage. This can happen even if you no longer occupy the residence. If your name is on the mortgage, you might be liable. Be very careful when removing yourself from a joint mortgage. Make sure nothing is done that will have a negative impact on your credit rating. Emotions can run very high when going through a separation. It is best to be safe than sorry.
Seek Legal Counsel
It is always a good idea to speak with the professionals that know the laws surrounding separation. There are many variations of separation that could possibly complicate the purchase of a home. Some couples choose to separate amicably and do not enter into any type of written agreement. They may never have a problem down the road. However, there is no guarantee that the relationship will remain amicable. That is why it is very important to speak with a lawyer. Other couples may just enter into a mutually agreed written document. One that is just between the two of them. This may not legally protect either party.
Those that have a separation agreement that was done through a lawyer still should seek legal counsel. This should be done prior to purchasing a home. The possibility of having to make an equalization payment may largely affect the ability to qualify for a mortgage. This issue could greatly affect your financial position.
Applying for a Mortgage While Separated
Mortgage specialists will insist on seeing a legal separation agreement. This may be requested before an application can be filled out. Sometimes the separation is uncontested. There may be no property, no assets and, no children. The lender may accept a Statutory Declaration.
Some people after separation forget to update their wills. This common mistake will leave the old wills valid and your ex could end up with your property. Separation and Divorce are very different legally. A separation changes nothing; a divorce changes everything. The importance of making new Wills and Power of Attorneys cannot be emphasized enough. You may want to exclude your ex of any rights or claims on your property. You should seek legal counsel before doing this.
However in Canada, the rules vary from province to province, but it is always best to speak with a lawyer.
If you are separated and purchasing a home with a common-law partner, it is imperative that you check to see if beneficiaries need to be changed. It has been known to happen that after several years, one partner passes and didn’t change their beneficiaries, the insurance policy, etc., is then paid out to the ex. This can have a disastrous effect on the current common-law spouse financially. It would be very difficult for the common-law spouse to have any legal rights. When a person is separated and living common-law with another, technically they have two spouses. Plans and financial protection must be put into place.
Provinces in Canada have their definition of common-law relationships. For example, in Ontario, you must live in a conjugal relationship for three years or longer for estate planning. However, regarding taxes it’s only one year of cohabitation.
When one or both parties do not have a will, this can get very messy. When you are legally married, the law protects the separated spouse. What may happen is your ex, could end up with your assets. This would cut your common-law spouse out. The common-law spouse would more than likely launch a lawsuit in this case. These issues need to be addressed in advance by partners, even if it’s an uncomfortable topic to speak about. No one likes to go to court, especially after the loss of a loved one. Going to court can also significantly reduce the value of the estate.
Child Support and Alimony Obligations
One problem when applying for future mortgages is your total debt ratio. Child support payments and alimony payments are considered part of your debt. Some lenders, however, may allow deduction of payments from gross income as opposed to total liabilities. This would be a huge benefit as it would lower your total debt ratio. This would open up different mortgage options.
However, receiving support or alimony payments is often viewed as income. This could have a positive effect on the qualifying amount of your mortgage. Certain criteria must be met to include this as income. The financial institution will more than likely want to see a bank statement. This is to prove the reliability of the payer. The best scenario would be regular payment dates, regular payments made, and no missed payments.
Assets Used to Purchase the New House
During a separation, either party can purchase a house. However, the funds that are used for that purchase cannot be matrimonial money. Or that has not yet been dispersed. The money from matrimonial assets may not possibly be used either. For example, Jane buys a house while separated with an inheritance she received. Then her ex Jack is not entitled to anything. This is because “his” money was not used to make the purchase.
So the short and the long of purchasing a house while you are separated can be a very complex task. Every situation is different, with different variables, and levels of complexity. To be sure you can safely purchase a new home during separation without any repercussions, do your homework!
Note: None of the information contained in this post is to be construed as legal advice. It is for information purposes only. It is advisable for any individual going through a separation to obtain legal independent advice.
Buying a House When Separated in Ontario
When a couple is going through a separation, it can be a very trying time for them. Often it is not the best time to be making major decisions, especially those that could affect the outcome of the separation itself. However, at the same time, a couple that is separating often has to find new accommodation for each of them. This raises the question about buying a house while separated.
Throughout Canada, every province has its own set of laws that pertain to separation and divorce. It is important that the individual wanting to buy a house know what the laws are that are going to pertain to this. Before taking that step, the potential home buyer should check with their legal representative to find out what their legal standing is about this.
What Can Happen
Depending on the circumstances of the separation and divorce, the courts may take a specific stance on the new home purchase. They could consider it as part of the marital property. Normally in a separation and divorce, the marital property gets divided. The new home buyer does not want to find themselves in that circumstance. Which would mean that part of the new home purchase would be long to the ex-spouse.
There will be a variety of different legal issues that have to be dealt with during a separation and divorce. One of these will often be the division of assets. What this refers to is what each person is going to come out of marriage or cohabitation with. The courts look at what each individual came into the relationship with. Then they will look at what assets were built by the couple jointly.
Then a decision by the court has to be made between these two. In a lot of cases, what was brought into the relationship will be exempt from the division of the assets that were gained during the relationship. This can get very complex and can draw out into a lengthy court case. For the individual that is going to buy the new home, it is important to know at what stage their separation case is at during the separation proceedings.
The Difficulties of Buying a House During Separation
There can be a lot of challenges that will arise for the individual who wants to buy a house and is going through a separation. Some couples decide that they are going to separate but not carry through with the divorce at this time. This can cause some confusion for those who want to buy a house. They are not sure if this is going to affect the divorce and the splitting of property.
For those of that want to just deal with the separation that they still need to do depend on legal advice to fully protect them. What will happen is that the respective lawyers will draft a separation agreement for the couple. During the separation agreement that there can be the division of property that takes place at that time. This is usually what most couples want as they each want to get on with their lives and often need the funds from proceeds of the division of property to be able to do do so.
There can be several challenges that will arise during this time such as
- The couple cannot agree upon the division of property. This creates a stalemate between them and no proceedings can be taken in regards to getting rid of assets to try and turn them into cash. For the individuals that want to buy a home, this can put a stop on their efforts to do so.
Difficulties Getting Funding
- Individuals that are going to buy a new home often need to arrange for a mortgage as separation can find this to be quite difficult. Lenders are wary about lending money when there are court actions taking place, such as the separation agreement that has not been finalized. They are more willing to become lenders if there is a formal separation agreement in place. If the borrower depends on money from the sale of the couple’s home, this is going to be of interest to the new lender. Knowing that there is a formal separation agreement in place takes away the concern that the sale of the house will not go through.
- Couples that are separating normally want to get on with their lives as quickly as possible. They may tend to start house hunting and putting offers on homes prematurely. Some borrowers will get a pre-approval for a mortgage and then find out in the end that the lender now wants a signed separation agreement. This can create even more stress for the home buyer. This supports the opinion that couples that are separating really do need to rely on proper legal advice.
Buying the Spouse Out
- This is often another consideration that takes place during a separation. One of the couples wants to keep the home and by the other partner out. This will usually entail having to refinance the home and at the same challenges are going to be faced for the individual that is buying out the home. Lenders are going to be reluctant to provide financing without proof of a legally signed and executed separation agreement.
Relying on the Right Professionals
With so much stress taking place during the separation and trying to buy a home at the same time, it can become overwhelming. Individuals that find themselves in the situation really need to rely on the right professionals. These can include:
- A family law lawyer
- Qualified professional real estate agent
- A real estate lawyer
These are just a few of the professionals that can help during the time of the separation when your property is going to be bought.
Note: None of the information contained in this post is to be construed as legal advice. It is for information purposes only. It is advisable for any individual going through a separation to obtain independent legal advice.