Everything happens for a reason and when one door closes, another one opens. A separation – for the lack of a better word – is just taxing. Mentally, physically, emotionally, and even financially – it can leave you drained.
Table of Contents
But if you surround yourself with the right people – everything gets easier. That’s not just a ‘buy a house while separated’ hack – it’s a life hack!
Surround yourself with family and friends – first. But ultimately, you will need somebody or a team of professionals to help you deal with all the legal and financial consequences of ending your common-law relationship.
Pro Tip: if you’re in Canada, look out for a legal team that’s well-versed with the Family Law Act.
Everything You Need To Know About Buying A House While Separated In Ontario
Can You Buy A Property Without A Separation Agreement While Separated In Ontario?
You may be able to buy a property without a separation agreement in Toronto however if you’re relying on mortgage financing to pay for your new property – you will need to show the bank your separation agreement to get a mortgage. Most banks will not give you a mortgage without seeing the separation agreement.
From a legal standpoint – divorced couples are not bound to create a separation agreement. Check what your divorce lawyer has to say about this but I highly recommend making one as it saves a lot of time in case of any disputes in the entire separation process.
When’s The Best Time To Buy A House While Separating In Ontario?
If you’re not well-versed in laws, this might sound strange. But you’ll need to wait at least 12 months after you separate from your common law partner to buy a house in Ontario. Even if you want to separate in Ontario without any strong grounds – you’ll have to first live separately for 12 months before filing a divorce. Going by the precedent set by the family court, couples are said to be in a financial relationship for at least 1 year after separation..
Sometimes you may even have to wait for more than 12 months – honestly, this is where you rely on your lawyer’s expertise and best judgment!
What Options Do You Have When Buying A House During Separation?
Buying out spouse: If you really like your current home – be it due to location, amenities, or its size in sqft – you can takeover complete ownership of property rights by buying out your spouse’s equity. It’s legal but could be a lengthy process – depending on how negotiations go. It’s a great option for those who want to avoid the hassle of buying a new property and are already comfortable in their matrimonial home. Whether its spouse A or spouse B that’s doing the buyout – be sure you’re in a good financial position to not just complete the buyout – but live comfortably after as well.
Refinance existing mortgage: Another option that you can explore if you want to simply stay in your matrimonial home is to look at refinancing your existing mortgage. Before you explore this option – double-check your credit score as you’ll need to prove that you earn enough alone to qualify for a new mortgage. It also makes no sense unless your existing home equity covers refinancing costs (unless you can afford to make a significant down payment).
Buying a new property alone: Separating could be a great opportunity to buy a new property – in your name alone. You can use your separation agreement to get a new mortgage from one of the lenders. Do your research and consult professionals (your lawyer too) to check if this route makes sense for you!
Buying a new property with friends/family: There’s a whole new generation of home buyers who aren’t shy of sharing ownership with a friend or family member they aren’t directly related to. You can join this cohort because it only seems to be growing. Startups are trying to address this gap too. Look at Nestment, who managed to raise $3.5 million this month. A study conducted by Wall Street Journal saw that between 2014 – 2021 homes registered by people without matching surnames were up 771%. Closer to home, a recent report by TRREB identified that nearly 20% of the homes bought in Brampton & Mississauga used funds received from friends/family to pay for their down payment.
What Factors To Consider Before Buying A Property While Separated In Ontario?
Emotional Challenges
Whether you end your marriage on good terms or bad – there’s an emotional weight attached to divorce. You may feel sad, anxious, or just lonely. There’s no point fighting alone – if you’re going through an emotional rollercoaster during your divorce first-things-first – you’re not alone. Speaking to an experienced divorce counsellor could help ease your nerves.
There are a few aspects of divorce that are inescapable and you have to come to terms with them for your good. The quicker, the better. You are going to lose some friends and that’s okay. Your spouse may feel or express anger or resentment at you – and that’s normal too!
At this point in time, your goal should be to protect your kids (if any) and come out on the other end of this nightmare with hope and positivity!
Financial Challenges
Ending your marriage contract has financial and legal implications. Separating can be an expensive endeavour. You may need a team of professionals to help you get through this process – and none of them will serve you for free.
A few examples of your expenses include compensating your family lawyer for their legal advice. You may also use the services of a divorce mediator to settle any disputes. Accordingly, you may need a team of real estate professionals – like a lawyer and/or agent to advise on how to deal with your real estate assets when separating.
All these expenses end up putting immediate financial strain on you. The key here is to get overwhelmed and succumb to pressure. Rely on the advice of professionals, family, and friends to help you get out of tough situations. In case you’re in a real stitch financially, don’t let your pride come in between yourself and smart decisions. Remember – help is always around the corner!
Legal Challenges
A marriage is a contract and as with any other contract – when you break it, there are legal consequences. I’ll put it this way – you’re not qualified to deal with the legal challenges of seeing through a separation. You don’t need to stress over it.
Spend some time hiring a lawyer that you really trust. Look for somebody who is experienced in dealing with divorces like yours.
Why Buy A New House When You Can Just Buyout Your Spouse?
When you love something so much, you must let go – while that’s how the saying goes, what if you didn’t let go? If you love your house, you don’t have to buy a new one – instead, you can negotiate with your partner and their lawyers to buy out their share of the property.
Yes, it’s legal and there’s nothing wrong with buying out your spouse. Often times during a spousal buyout, both parties are left better off as they both end up getting what they really want.
How To Buy Out Your Spouse’s Share Of The Home?
Below is a very condensed, step-by-step process to guide you through the spousal buyout process if you’re going through a divorce. The first step is to figure out who is buying whom out – if anybody is at all. Once you’re both aligned there, the next steps could be:
Draft a separation agreement: A separation agreement is a legally binding document that governs many crucial aspects of a divorce – from child custody to the distribution of assets. It has multiple benefits. Each spouse can also use it to get a mortgage to buy a new home (in case the buyout doesn’t work or for any other reason). More importantly, however, is that since it sets certain aspects of the divorce in ‘stone’ – the entire separation process ends up moving a lot quicker!
Conduct a home appraisal: Get your property appraised to find out its true value today. You can hire a professional or ask your real estate agent for their help. There are a number of factors that go into determining the value of your house.
Calculate your home equity: Your home equity essentially represents how much of the house you own today. An easy way to calculate your home equity is to subtract your outstanding mortgage payment from the appraised value of your home.
Determine buyout amount: Once both spouses have an understanding of what their house is worth and how much equity they own today – you can finally negotiate the buyout amount. There’s a standard formula for calculating the buyout amount (simplified version shared below). But regardless of what you negotiate – what’s essentially happening here is that one spouse is buying out the equity of the other spouse by compensating them for their share of home equity (that’s generally 50%).
Close the deal: With the buyout amount finalized, the only thing left to do is to close the deal and walk away with your wares!
Related: Can You Sell Your House When Separating In Toronto?
How Do You Calculate The Buyout Amount?
To calculate the buyout amount, you can follow this simple formula:
Buyout amount = (Appraised value of the property – Mortgage payments outstanding) / 2
You’re essentially finding out your home equity and dividing it by 2 (your share and your spouse’s share).
Final Words
If you’re going through a separation and are looking to add a real estate agent to your team, book a call with me or somebody from my team, and Iet us help you move on to the next, exciting chapter of your life!
DISCLAIMER: This blog post is intended to be used for education purposes only, and is not to be interpreted as advice, financial, investing, legal, or otherwise. Any decision or action made by any viewer of this video is entirely at the discretion of that individual. Pierre Carapetian Group does not warrant or represent that any information is accurate.
