In the event of separation, keeping the house is often a challenge on top of that of the breakup itself. Fortunately, there are ways to keep your property.
The first thing to do is to check if your finances allow you to buy back your spouse’s share.
Start by having the market value assessed. You can seek help from a real estate broker or certified appraiser. Then, once you know how much you have to shell out to buy your ex’s share, you can start doing the math.
If you have to take out a mortgage in order to buy back your ex’s share, the difficulty is that your only income is used. In addition, you are fully responsible for property costs, such as municipal and school taxes, maintenance, electricity, internet, etc.
And the challenge will be especially great if by the time you separate, you have accumulated very little equity in your home. Take the example of a couple who, just before separating, had just bought a house a few months ago with a mortgage of $ 300,000. The little capital they have accumulated will be swallowed up by transaction costs, which will not leave much for the spouse who wishes to buy out the other’s share and who will have to assume the $ 300,000 mortgage alone.
- Check if you qualify with a financial institution. Do this check before taking any other steps mentioned later in this text. Banks will take into consideration your debt, income, and credit history.
- Ask your parents to endorse your loan. If the bank refuses to help you, you can ask your parents to endorse your loan. But beware, although it may allow you to keep the building, this method has a flaw: you become linked to your endorser and vice versa. So if you go bankrupt, your parents will have to pay off the mortgage on your house.
- Ask your parents to buy the house. It’s not just banks that can issue mortgages. Your parents can do this too, as long as they have the cash to do so. In addition, they are free to subject you to loan conditions and a favorable interest rate.
- Use a temporary private lender. The advantage of the private lender is that its criteria are more flexible than those of the banks. But beware: this solution must be temporary, while your financial situation allows you to take out a mortgage with a financial institution, since the interest charges of a private lender are higher than those of banks.
- Rent the house long term. If one of your bedrooms is vacant, or your finished basement can accommodate a tenant, you can rent this space for the long term, that is to say for a period exceeding 31 days and thus withdraw an income that you will help pay off your mortgage.
- Rent the house for the short term. By renting on a short-term basis (31 days or less), you don’t need a lease and you can rent whenever you want, for example to travelers passing through your city. However, before undertaking this type of rental, you must check if it is allowed with your city or borough.
▶ Ghislain Larochelle is a professional registered with the Order of Engineers of Quebec and with the OACIQ.
- For this to be fair, the ex-spouse who sells his share to the other should pay him half of the selling costs (in particular the equivalent of the fees of a real estate broker). The person who keeps the house will one day have to pay all these costs themselves.
- Remember to budget for repairs and maintenance tasks that were done by the spouse, if you are not able to do them yourself.
- Before buying your ex’s share, have the house inspected. This will prevent you from being caught by costly work.