Divorce and Managing Your Mortgage

May 16, 2024 | Posted by: Keith Leighton

Divorce and Managing Your Mortgage

Divorce can indeed have significant implications for your mortgage depending on the specific circumstances of the separation and the agreements reached between the parties involved. Divorce often involves the division of assets, including the family home.  Here are some key points to consider regarding the impact of divorce on your mortgage:

1. Responsibility for the Mortgage: If both spouses are listed on the mortgage, they are both legally responsible for making payments. This obligation typically continues even after divorce unless one party is removed from the mortgage through refinancing or other arrangements.

2. Property Division: During divorce proceedings, the division of assets including the family home will be determined. If one spouse wishes to keep the home, they may need to buy out the other spouse's share of the equity. This often involves refinancing the mortgage to remove the departing spouse from the loan.

3. Refinancing: Refinancing the mortgage may be necessary if one spouse wishes to keep the home. This process involves applying for a new mortgage in one person's name only, which can be based on their individual income and creditworthiness.

4. Selling the Home: In some cases, selling the home and dividing the proceeds may be the best option. This can help both spouses move on financially and emotionally, especially if neither party wants to keep the home or if it's not financially feasible for one spouse to buy out the other.

5. Consent: If one spouse wants to stay in the home and continue paying the mortgage, they may need the consent of the other spouse or a court order, especially if both spouses are listed on the mortgage.

6. Legal Advice: It's crucial for individuals going through divorce to seek legal advice from a family law lawyer who can provide guidance on how to handle the mortgage and property division in accordance with Canadian laws.

7. Credit Implications: Divorce can impact both parties' credit scores, especially if mortgage payments are missed or if one spouse defaults on the mortgage after the divorce.

8. Spousal Support and Child Support: The payment or receipt of spousal support or child support may also impact mortgage eligibility and affordability for both parties.

It's important for individuals going through divorce to carefully consider the emotional, legal and financial implications of their decisions regarding the family home and mortgage. It's essential to seek professional guidance from a family law attorney and a DLC Ideal Mortgage broker to ensure that you make informed decisions that are in your best interests.

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