Spousal Support and the Mortgage

When you submit an application for a mortgage, the lender will review your finances to determine whether you are able to cover the costs of your debt.There are a number of different factors that the lender will consider, but the largest part of the process is determining how much income you have.

When it comes to applying for a mortgage, support obligations will be viewed as monthly liabilities for the payor, and as income for the recipient. Although all sources of income are considered to be “income” by the recipient, it is important to understand that from a mortgage financing perspective, not all sources of income are considered qualifying income. Spousal support is one of those tricky sources of income that is generally considered as qualifying income but there are limits to how much of your income it can be.

Spousal support will generally qualify as income for the lender’s purposes when it is continuous and stable. This means that there is a written separation agreement in place setting out the amount of spousal support to be paid, how often it will be paid, and for how long it will be paid. This helps the lender to document your actual income and gives them a way to measure what you can reasonably borrow. Some lenders may have a requirement that the spousal support has already been paid for a certain period and will continue to be paid for a specified duration (i.e. spousal support has already been paid for 6 months and will continue to be paid for 3 years).

Be aware, in Canada, you may not be able to qualify for a mortgage if spousal support makes up greater than 30% of your income. Lenders will require you to have other verifiable income sources that make up at least 70% of your total income before they will accept your loan application. If you intend to purchase a new matrimonial home or to refinance you’re the existing matrimonial home, you should ensure that your spousal support will be considered as qualifying income before you finalize your separation agreement. The Common Sense Divorce recommends that you speak with a Mortgage Professional so that you can get the support you need to qualify for your next mortgage.

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