One of the various aspects of Real Estate I offer specialized knowledge is selling a matrimonial home in divorce.
In fact I’m Ontario’s First Real Estate Divorce Specialist. So I see more and more clients who are getting a divorce and preparing to sell their matrimonial home.
When a couple decides to split it’s common for both spouses to rely on the notion that once the matrimonial home is sold, each spouse will get 50% of the equity.
But many people forget about the mortgage.
Specifically, sometimes a spouse moves out and assumes it’s not fair for him/her to pay the mortgage and so the other spouse should pay the mortgage because other spouse still lives in the matrimonial home.
Other times a spouse might stop paying the mortgage out of spite.
If one spouse has been paying the mortgage alone but the other spouse is the spouse who ended the marriage or is causing a nasty divorce, then the resentful spouse who’s been paying the mortgage might stop paying mortgage payments .
Here’s the big catch that can really hurt you.
IF BOTH spouses are named on the mortgage then you MUST ensure the mortgage is paid until the property is SOLD and the mortgage is discharged.
In other words, even if ONLY your spouse’s name is on the Title/Deed of the property, if your name is on the mortgage then don’t assume the mortgage (or other costs) are all the other spouse’s responsibility. Here’s what can happen.
If your soon-to-be-ex suddenly stops paying the mortgage payments then you’ll both be equally responsible for making up the lost payments and the accrued interest when the property sells.
But here’s the kicker!
If you miss enough payments the Bank or Lender can force Power of Sale.
If that happens the Bank will dictate when the home is sold and for how much.
Depending on how much equity is in the house and how much interest has accrued, and the additional PENALTIES & ADMIN fees related to Power of Sale, combined with a possibly lower sale price, you might end up with A LOT less money than you thought (or no money) from the sale.
BUT WAIT THERE’S MORE!
It will ALSO drastically effect [negatively effect] BOTH of your credit scores/credit ratings, which then will effect your ability to get a new mortgage when you buy a new home or you apply for new credit cards – possibly for several years.
You might have even been pre-approved for a mortgage when we first listed your home for sale and started searching for properties.
But in the 3-4 months from the time the home was sold until the closing date of the sale, your credit rating is updated with the credit bureau.
And if there were complications from payments on your mortgage on your matrimonial home during those months (eg.not paying the mortgage) your credit rating could have gone done drastically.
If you’re soon-to-be-ex stops paying the mortgage speak with your Lawyer because it is likely in your best interests to maintain the mortgage payments, and you will possibly get an increased portion from the sale of the house [in the form of what they call an “Equalization Payment” to reimburse you for covering the extra 50% of each payment.
Or your Lawyer might be able to file a motion to get your spouse to resume payments.
If you’re getting a divorce and want to protect your mortgage and your credit rating you’re welcome to contact me with any questions you might have and I’m happy to answer and guide you in the right direction!
If you want more information about getting a divorce in Ontario check out my full divorce page.
Also be sure to visit www.DivorceSpecialistsGroup.com for some great resources. They are the best!