{"id":20896,"date":"2022-04-21T08:00:00","date_gmt":"2022-04-21T12:00:00","guid":{"rendered":"https:\/\/www.zolo.ca\/blog\/?p=20896"},"modified":"2022-04-20T16:43:54","modified_gmt":"2022-04-20T20:43:54","slug":"refinancing-house-after-divorce","status":"publish","type":"post","link":"https:\/\/www.zolo.ca\/blog\/refinancing-house-after-divorce","title":{"rendered":"Why You Shouldn’t Be Daunted by Refinancing a Mortgage Alone"},"content":{"rendered":"\n\n\n

Buying a home is often the exciting beginning of the next chapter in your life. When you move in, you\u2019ll probably have an idea of your life in that home, what milestones you\u2019ll celebrate, and what goals you\u2019ll accomplish.<\/p>\n\n\n\n

Unfortunately, life doesn\u2019t always work out the way we want, and your life in your home might move in an unexpected direction. For example, your marriage might break down. Your partner could experience chronic unemployment, or even die.<\/p>\n\n\n\n

If life doesn\u2019t go your way, you might find yourself having to refinance your home on your own. While this may seem daunting, it\u2019s more common than you think. The number of Canadians purchasing and owning homes alone has been steadily increasing. Single-person households are now the most common household type in Canada, rising from 1.7 million in 1981 to four million in 2016<\/a>. The fastest-growing age group of Canadians living alone is adults aged 35 to 64, and many of them are purchasing homes. According to an RBC Homeownership Poll<\/a>, 32% of new home buyers are hitting this significant milestone alone.<\/p>\n\n\n\n

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So if 32% of Canadians can buy a home alone, you can refinance on your own. Don\u2019t be daunted. With the proper research and preparation, it\u2019s completely doable, here\u2019s how.<\/p>\n\n\n\n

Let\u2019s Talk Mortgage Affordability<\/h2>\n\n\n\n
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There are plenty of reasons you might need to refinance your mortgage loan alone. For example, you got divorced and chose to keep the home as part of your marital asset split. In that case, you\u2019ll need to refinance your house after divorce and have your spouse removed from the title.<\/p>\n\n\n\n

Alternatively, if you\u2019ve suffered the loss of a partner, you may need to refinance your home into your name only and have the deceased partner removed from the title.<\/p>\n\n\n\n

Related content<\/p>

So You Chose to be a Stay-at-Home Spouse – Here’s How to Protect Yourself<\/a><\/p><\/section>\n\n\n\n

Finally, maybe you haven\u2019t lost a spouse but lost their income. In this case, you won\u2019t need to update the title of your home. That said, if you want to access the equity in your home, you\u2019ll need to refinance, and the burden of qualifying for that refinance will fall on you alone.<\/p>\n\n\n\n

The first step toward refinancing your home alone is to figure out whether you can afford it. To do this, you\u2019ll need to figure out how much you\u2019ll be refinancing.<\/p>\n\n\n\n

Refinancing and Equity Payouts in Divorce<\/h3>\n\n\n\n

If you\u2019re divorcing, the refinanced amount might be the remaining balance on your mortgage. But it could also be the remaining balance plus an equity payout. Again, it depends on the circumstances of your separation. Here\u2019s an example.<\/p>\n\n\n\n

Let\u2019s assume you and your spouse have a home that is worth $500,000, and the remaining mortgage is $250,000. You are both entitled to half of the equity in the home, or $125,000 each. If you prefer to keep the home, you may need to refinance your house after divorce to pay your spouse the half they are owed\u2014in this case, $125,000. When you apply for a mortgage in your name only, you\u2019ll need to add this sum to the remaining mortgage balance. In this case, the $125,000 equity payout to your spouse is added to the remaining mortgage balance of $250,000, for a total mortgage of $375,000. This is known as a cash-out refinance.\u00a0<\/p>\n\n\n\n

Related content<\/p>

Why You Shouldn’t Buy a House Right After Divorce<\/a><\/p><\/section>\n\n\n\n

The example is simple, but in many cases, the equity split is spread across several financial assets. Your equity split could include property, vehicles, retirement savings, and cash accounts. Once you know how big your mortgage will need to be, you can calculate whether you can afford it.<\/p>\n\n\n\n

Refinancing after Spousal Death<\/h3>\n\n\n\n

Another scenario is refinancing your home after the death of a spouse. You may have received a cash infusion. This cash could come from your spouse\u2019s life insurance or as an inheritance. This cash can reduce your mortgage’s total size and make your monthly payments more affordable for one income.<\/p>\n\n\n\n

For example, suppose your existing mortgage is $250,000, and you receive a cash infusion of $100,000 from the estate. In that case, you could use that money to reduce the size of your mortgage refinance amount to $150,000. A smaller mortgage amount is more affordable for a single income. Refinancing like this can be a good strategy if you need to reduce your monthly mortgage payments to an affordable level.<\/p>\n\n\n\n

How Much Mortgage You Can Afford – Alone<\/h2>\n\n\n\n

Once you know the amount you need to refinance your house after divorce, it\u2019s time to determine whether you can qualify for a refinance. You can talk to a mortgage broker or use a mortgage affordability calculator. A mortgage broker can tell you whether you can afford your new mortgage amount and estimate your monthly payments. The broker gets paid by the lender you chose to refinance through, so the process is free.\u00a0<\/p>\n\n\n\n

A mortgage broker will ask for the following information. They’ll then tell you how much mortgage you can afford, according to federal guidelines of affordability. You\u2019ll need your:<\/p>\n\n\n\n