Money Smart
Divorce Mediation

Financially Wise Separation Agreements

Gail Vaz-Oxlade's Guide To

For more than 20 years you have witnessed Gail Vaz-Oxlade’s trademark straight-up money wisdom, both on Radio and Television, most notably as host of TVs Till Debt Do Us Part, Princess and Money Moron. Gail is a multiple time, best-selling financial author, and one of the top Canadian authors of the past decade. Gail brings her common sense wisdom to answer your questions about The Matrimonial Home and divorce in Ontario.

 

Gail Vaz-Oxlade's Guide To

For more than 20 years you have witnessed Gail Vaz-Oxlade’s trademark straight-up money wisdom, both on Radio and Television, most notably as host of TVs Till Debt Do Us Part, Princess and Money Moron. Gail is a multiple time, best-selling financial author, and one of the top Canadian authors of the past decade. Gail brings her common sense wisdom to answer your questions about The Matrimonial Home and divorce in Ontario.

Gail Smile Transparent

The Matrimonial Home in Ontario

When couples separate in Ontario, typically the matrimonial home is sold – either to you, to your spouse or to a third-party buyer. You should always have a formal Separation Agreement in place that outlines all financial terms before attempting to change anything pertaining to home ownership.

A formal Separation Agreement is required to instruct your real estate lawyer how to disperse assets upon the sale of your home. Equity funds will sit in your real estate lawyer’s trust account until a Separation Agreement instructs the lawyer how to disperse the funds.

ALL Canadian Banks will require your legal Separation Agreement before they will approve you for a new mortgage. You will be required to qualify for a new mortgage based on your income and your debts alone regardless of what is outlined in that Agreement. Support payments will be considered as part of your total debt load when banks review your application.

If both parties are still on an existing mortgage then from the Bank’s perspective both are responsible for the payment of the mortgage and all taxes until one of them is removed.

“If you intend to buy out your spouse’s share of the matrimonial home, you will have to pay land transfer tax on your spouse share, unless you have a formal separation agreement in place.”

Make Smart
Money Decisions
I'm not sure what to do?
I've never managed the money...
How do I plan for MY future?
Bag Lady Syndrome
(syn) or 'Street Guy Syndrome'
NOUN - The fear that one will become financially destitute after a divorce.
Family Mediation with a Financial Twist
“For most people divorce is less about legalities and more about finances, tax implications and making smart money decisions. This is why we started The Common Sense Divorce." – Gail Vaz-Oxlade

Do I Buy or Do We Sell?

There are lots of emotions tied to the matrimonial home.  Many speak of how they want to keep stability for the children.  Some want to stay in their neighborhood and others are very tied emotionally to their home and do not want to lose it.  When all is said and done, deciding to buy out your spouse and keep the home or deciding to sell the matrimonial home ultimately boils down to money.  Can you afford to carry it alone.  Here are a couple of things to consider before you make your decision.

  • There are memories tied to your home, both good and bad.  Do you want to carry these memories forward with you into your new life?  There is something to be said about starting new memories in a new home.
  • Your children are more flexible that you may perceive at this time.  Many couples use the excitement of new homes and new bedrooms to help children transition.D
  • Are you able to maintain the home on your own.  Taking on a home means cutting the grass, and fixing the roof.  Be prepared that you will have to do this without your exes assistance (even if they say they are going to help.)
  • Be careful to not be house poor.  Taking on a financial expense that will overburden you will only add to your stress and hinder your financial recovery.

Buying Out Your Spouse

Should you decide to buy the matrimonial home from your spouse, you must understand that you must take on the whole existing mortgage plus pay out your spouse their half of the equity in the house.  For many this means that you need to not only assume the existing mortgage but you must increase the mortgage to include the amount owed to your spouse.  For instance, if your house is worth $500,000 and you have a mortgage on the home for $200,000 that means the equity would be $300,000 of which your spouse would get half ($150,000).  Therefore if your decide to keep the matrimonial home, you will have to assume the existing mortgage of $200,000 and increase it another $150,000 to pay out your spouse.  You alone will now carry the new mortgage in the amount of $350,000.

What Do I Do First? What Do I Do Next?

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CONSULTATION
Free Telephone Assessment

Our telephone Assessment Consultation will help you better understand your situation, clarify information & help you plan your next steps.

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ORGANIZE
Prep & Planning Session

First meeting: a personalized Orientation & Prep Session to share your story, talk about your finances and get prepped to move forward.

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AGREEMENT
Mediation That Fits Your Situation

Numerous mediation bundles to fit your situation that include your mediator and the financial and legal services, to save you time, money and drama.

20 YES and NO’s About The Matrimonial Home

  1. NO it doesn’t matter who’s name is on title… if you both lived there before the date of separation it is the matrimonial home.
  2. NO Typically you cannot change the locks as both spouses have an equal right to possession of the matrimonial home after separation.
  3. YES, even if you bought the house before you were married, once your spouse moved in after you are married, this house instantly becomes considered as the matrimonial home.
  4. NO you don’t get credit for the value of the matrimonial home before marriage. The matrimonial home is given special treatment and you cannot deduct the pre-marriage property value, as you would with other assets. 
  5. YES you are responsible for the mortgage, even if you don’t live there.  If your name is on the mortgage you need to ensure it gets paid.
  6. YES inheritance is exempt UNLESS you put the money into the matrimonial home.
  7. NO your ex-spouse will not be paying your mortgage after you divorce.  You may receive support, but you will need to qualify for your own mortgage.
  8. NO your spouse is not required to repay the gifted down-payment money that your parents gave you for the down payment.  You can try to negotiate it with your spouse, but the courts will not legislate it.
  9. YES you will pay land transfer tax, if you buy out your spouse’s share of the matrimonial home, UNLESS you have a proper separation agreement in place.
  10. YES, if you owned more than one home (or a cottage etc) it may also be considered a matrimonial home.
  11. YES the matrimonial home is always divided unless you have a marriage contract that deals with the matrimonial home differently.
  12. YES if there is domestic violence happening in your home you can apply to the courts for an order for exclusive possession. Obtaining an order will require your spouse to live somewhere else.
  13. NO an order for exclusive possession does not affect your ownership rights as such court orders do not decide who owns the property.
  14. NO an order for exclusive possession are usually temporary, and are intended to give you time to get your separation agreement completed.
  15. YES In most cases, children are allowed to live in the matrimonial home.
  16. NO If you are Common Law you do not automatically have the same rights with regards to a matrimonial home.  The rule of thumb is who’s name on title is who it belongs to now.
  17. NO you are not allowed to mortgage, refinance or place a line of credit on the matrimonial home without your spouse’s written consent.
  18. NO a property that was gifted to your, or inherited is NOT exempt from division.  If you and your spouse lived there, it is considered the matrimonial home and will be divided between you both.
  19. YES If can’t agree on what to do with the matrimonial home, you may apply to court for an order of partition and sale.  If granted, the court will order the house to be sold the proceeds to be split.
  20. NO There is no right of first refusal within Ontario family law.  If the house is ordered to be sold, the party wishing to stay in it, must bid on the open market with all other the other buyers.
GENERATE YOUR SEPARATION ANALYSIS REPORT

Every couple faces unique challenges.
Understand how separation will affect you,
your children, your finances and your future.

DO NOT BEGIN NEGOTIATIONS UNTIL

Valuing The Matrimonial Home

There are normally two ways to value the matrimonial home during the separation process. If you and your spouse intend to sell the home to a third-party, the value of the home is whatever you can sell it for. Make sure to have your Separation Agreement completed before selling the home, as your real estate lawyer will hold the proceeds in trust until the separation agreement is finalized.

If you or your spouse are buying the matrimonial home from the other, the value of the home will be based on a formal appraisal by a certified Home Appraiser (which is different than a realtor). Be aware that if you intend to arrange a mortgage for the purposes of refinancing, each bank will typically have their own list of Home Appraisers, so it may be prudent to arrange for the appraisal to be done by the bank you are receiving the mortgage from so that you do not have to pay for the appraisal twice. 

Can I Use a Realtor to Value Our Home?

You and your spouse can decide to value your home at any price you want to, if both of you are agreeing.  For some people, they simply agree on a price.  For other’s they call on a realtor.  A Realtor has access to recent sales of houses in your neighborhood.  Be aware though that a Realtors valuation is only a professional opinion and does not constitute a formal appraisal for re-mortgaging purposes.  So for instance, your realtor may say that your home is worth $600,000.  This would mean that you would each receive $300,000 of the equity.  But when you try to get a mortgage to pay out your spouse their $300k a formal appraisal comes in saying that your house is only worth $570,000.  This would mean that in reality you should be paying your spouse only $285,000 and that you are paying them $15,000 too much.

What To Expect When You Call The Common Sense Divorce

Separation Agreement

Not everyone is ready to talk with someone in person.  You can call the Common Sense Divorce at anytime and hear a pre-recorded 2 min message about our services.

We will gladly take the time to speak with you about our services and the divorce process in Ontario.  The Common Sense Divorce offers a free 20 min telephone assessment and consultation.

We understand that this is a difficult time and calling us is a big step.  We are going to work hard to make this phone call easier, make you feel at ease and make sure that we respect your privacy.

We understand that you may be just researching and have not made any decisions.  We do not assume that because you are calling, that this means you are divorcing.

The Matrimonial Home and Common Law

In Ontario, Common Law is NEVER considered to be married.  In does not matter how many years you have lived together… you are NOT considered to be married in Ontario.  Therefore the rules about the matrimonial home do not apply to common law couples.  Typically the home belongs to the individual that the home is registered to.  With regards to the matrimonial home and common law relationships – the rule of thumb is, what was yours when you came into the relationship is yours when you leave the relationship.

Make Smart
Money Decisions
I'm not sure what to do?
I've never managed the money...
How do I plan for MY future?
Bag Lady Syndrome
(syn) or 'Street Guy Syndrome'
NOUN - The fear that one will become financially destitute after a divorce.
Family Mediation with a Financial Twist
“For most people divorce is less about legalities and more about finances, tax implications and making smart money decisions. This is why we started The Common Sense Divorce." – Gail Vaz-Oxlade

The Matrimonial Home and Mortgages

Divorce is often less about legalities and more about money.  Divorce and the matrimonial home, similarly is more tied to mortgages and taxes than anything else.  There are mortgage implications and there are tax implications that need to be addressed.

Is There a Mortgage for People Divorcing?

Typically when you want to refinance your home you are limited to refinancing only up to a maximum of 80% of the appraised value of your home.  Unfortunately many times in today’s housing market this may not provide enough money to pay off joint debt and payout your spouse with any share of their equity.   A number of Canadian Banks do offer what is called a “Divorce Mortgage.”  Basically, the Divorce Mortgage allows you to buyout your spouse by refinancing your mortgage up to 95 per cent of the appraised value of your home.   In essence they are treating it as though it is an original purchase and therefore requiring only a 5% down payment.

Do All Canadian Banks offer the Divorce Mortgage?

No, the Divorce Mortgage is not offered by every Canadian Bank.  The best way to access a divorce mortgage is to contact a specialized divorce mortgage broker, as they have access to all of the banks in Canada.  Keep in mind that in order to qualify for this mortgage or any mortgage, your income, and debt ratios must support it.  This means you have to be making an income yourself, making enough income to support a new mortgage and not not carrying too much debt.

Keep in mind that Canadian Banks are notoriously difficult these days with qualifying.  Here are a few of the rules that are in place in order to qualify for a 95% divorce mortgage.

  • Both you and your spouse need to have to been on title to the property before you separated.
  • You will need to have a finalized, legal Separation Agreement signed by both of you.
  • The following documents confirming the sale price and transfer of title must be on file
  • You will need to create a legal Offer to Purchase Agreement  – from one spouse to the other
  • Since this purchase transaction is not Arms length, the bank will require a full internal appraisal by their approved appraiser (not a realtor).

Do You Refinance a Mortgage During a Separation?

You are about to separate or you have just separated and your 5 year mortgage comes due. You DO NOT renew a mortgage if you are considering separation. This is probably one of the biggest and most expensive mistakes that individuals make.    Here’s what you need to be thinking… first if you renew a fixed mortgage, you are going to be hit with HUGE mortgage penalties, when either of you buys out the matrimonial home, or if you intend to sell the house. 

Often people want to refinance a mortgage before a divorce in order to consolidate debt.  This just doesn’t make sense.  All you are doing is rolling debts (especially unsecured debts)  into the matrimonial home and losing any potential claim for non-responsibility of those debts.  When you separate, your debts are dealt with in your Separation Agreement.  Leave them out of the matrimonial home and deal with them then.

If your mortgage comes due during a separation, immediately call the bank and tell them that you are facing a separation.  Most Banks will either extend your mortgage as is for a few months, put you into a temporary mortgage that will give you some time to deal with your matters.  The interest rate may be a little bit higher, but it will most definitely cost you less than mortgage penalties will.

RESEARCHING?

Separation Agreements

Spousal Support

Family Mediation

Child Support

Divorce in Ontario

The Divorce Process

Amicable Divorce

Certified Divorce Financial Analyst

Same Sex Divorce

Divorce And Your Money

Pension Valuations

Divorce and Taxes

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