May 2010
This article is provided by Brian Marling of Neighbourhood DLC – Canada’s #1 Mortgage Team 905.372.7222
We continue to benefit from one of the best mortgage environments in history. Take a look at the interest rates on mortgages these days. Now look at what you’re paying on your credit cards and other debts. You can actually power down your debt load faster by pulling together your credit cards, car loans or any other high-interest debt and rolling everything into a new or existing mortgage. This can be a great money-saving strategy (see illustration below). The benefits of pooling your debt are immediate and long-lasting: improved cash flow; fewer payments; a brighter credit picture; and big savings on your overall interest costs. If you have equity in your home, there is no reason to be holding large amounts of high-interest debt. The right refinancing package can help put an end to the monthly squeeze of too much credit card debt or too many loans.
Unfortunately, the stress that can be created from debt in a marriage, or family, ends far too often in relationship break-up. Allow an expert like myself to evaluate your situation before it is too late. I can assess your situation if you are worried about penalties associated with breaking your current mortgage. The savings each month often far outweigh any penalties. You can either use these savings to ease your monthly cash flow or apply some of it to hammer down your debts faster than you thought possible. For instance, if you put $450 of that cash flow into your mortgage payment, you’ll reduce your amortization from 25 to 15 years! As always, I’m just an e-mail or phone call away if you want to discuss debt management or anything else!
W hat can you do if the relationship is already in the process of dissolving? We all know that marriage isn’t always forever. And when a separation occurs, a home is often involved. Since most couples have a joint mortgage – one where both names are on the mortgage and title of the home – when separation or divorce proceedings occur, many wonder what will happen with the home. When the marriage comes to an end, there are two obvious options concerning the home: 1) sell the property and split the proceeds according to your agreement and go your separate ways; or 2) one person buys the other party out of the mortgage and the title of the property. The first option is a straight-forward transaction where you put the house up for sale, sell and split the proceeds. The second option, however, is slightly more complicated.
The decision between the options is a personal one borne out of the specific circumstances of the parties involved. Perhaps there are young kids involved that need to stay in the house, the market is down and there will be a loss on the property that neither party can afford, one party can afford to buy the other party out, etc.
Once the decision is made, how do you go about buying the other person out of a mortgage? Well, essentially, you are refinancing your mortgage using a single income (the person who is buying the other party out of the house) and qualification, versus the original purchase, which was based on joint income and qualification.
If you are the one buying your partner out, the first step is to ensure that you can afford the mortgage payments. This is imperative because the lender will ask for proof that you are capable of covering the mortgage in order for you to apply on your own. In addition to covering the mortgage amount, you will have to come up with whatever dollar amount you have agreed on to buy the other partner out. This may come out of the equity in your home if it’s sufficient.
In essence, if you can afford the mortgage on your own, the most common means of buying out your partner post-separation and transferring title out of the joint name and into your name, is to refinance. I can help you through each step of this process. If you are not in a financial position to buy your ex-partner out of the house, and you agree to both stay on title and have payment arrangements, there is one warning to be taken very seriously. Just because one person is responsible for the payments (even with a court order), if the mortgage goes into default, both parties on the mortgage will be affected.
The most important piece of advice when dealing with a mortgage during a separation is to become informed. Know your options, talk to professionals about your options, and make an informed decision regarding your home and mortgage.
Here at Neighbourhood, & the home of the Brian Marling Mortgage Team, we are concerned for the total well-being of our clients. That’s why we are taking the years of experience from our award winning office and offering a series of FREE Seminars to our clients and their friends & families and to the public at large. The seminars, entitled ‘Financial Fitness’, will be offered free of charge and will cover all the secrets of successful personal financial freedom. If interested please call our office at 905.372.7222 to reserve your spot as seating will be limited.