Divorce is ranked as life’s second most stressful event for good reason: The process is both emotionally draining and financially taxing. One of the most difficult (and sometimes heated) negotiations between couples parting ways is housing. As one spouse is usually required to find another living arrangement, the idea of purchasing a second property may seem like a smart solution.
While purchasing a home while legally married but separated from your spouse is certainly possible, it does come with some potential complications and extra documentation. Avoid the struggle and additional heartbreak by keeping the following 3 tips in mind while your divorce case is pending:
Sign A Formal Separation Agreement
If you purchase a new home before the divorce is final the court may deem it a marital asset and divide it accordingly. Avoid putting your new home in jeopardy by getting your spouse to sign a formal Separation Agreement. This document, which is signed by both spouses and is approved by the court, addresses property and separate assets including each spouses’ ownership interests (ex. The document should state that the homebuyer’s spouse will have no rights to the home). All Canadian Banks require a legal separation Agreement before they will approve you for a mortgage.
Using marital funds to purchase your new property is referred to as “commingling” in legal terms and should be avoided. All stages of the home sale, including the down payment, must be funded with your own personal money. Combining marital funds with your own personal assets could put your new property at risk of being viewed as a marital asset. Remember: Using martial money to finance the upkeep and maintenance of the home is also considered commingling.
Think About Your Future Financial Situation
It’s important to keep in mind how your financial responsibilities or budget may change following your divorce. For example, while you may be able to easily afford the utility bills, upkeep, mortgage payments on your new property now, your income may be significantly reduced after the divorce if you have to pay child or spousal support.
Financing your new home by selling your current property also comes with the penalty of breaking your mortgage contract which could cost upwards of a thousand dollars. Be smart and consider what your financial picture will look like after your divorce is final before shopping around for a new home outside your budget.
Are you looking to purchase a new property while your divorce is pending or buy your spouse out of your marital home? Let me help you find a fresh start in a new home. I have over 16 years of experience in the Real Estate industry and am currently a long-standing member of RE/MAX’s prestigious Platinum Club. Contact me today. I’m always happy to answer any questions you may have: 416 903 7653 or firstname.lastname@example.org.