Tuesday, August 30, 2016

Why do I need a separation agreement to get a mortgage?

Mortgage qualifications can become more complicated if you are separated. Banks often ask to see a separation agreement before approving you for a mortgage. It is likely that a bank will require a  separation agreement if you are married but separated from your spouse and you are either:
  • buying your spouse out of the matrimonial home or
  • purchasing a new home.

Why do Banks Want to See a Mortgage Qualification Separation Agreement?

Mortgage qualification separation agreements establish better financial certainty after separation. Your lender will most likely want to know what child or spousal support obligations you have as well as assessing the property and debts you will be taking on. If you hope to claim support payments you receive as part of your mortgage application, then a mortgage qualification separation agreement can help. This will give the bank a better picture of your financial situation and help them determine whether you qualify for a new mortgage Although you may have a verbal agreement with your spouse, a mortgage qualification separation agreement gives the bank the assurance that it is a binding agreement.

What is Included in a These Agreements?

Generally, separation agreements for mortgage qualification will normally set out the property that each person will keep and the debts that each party will be responsible for. If you have children together it will likely also deal with custody, access and support arrangements for your children. Additionally, spousal support is commonly addressed, whether there is an obligation for one party to pay support or not. Mortgage qualification separation agreements are still binding agreements. If you decide to proceed with a divorce, the terms of the separation agreement will often form part of the divorce order.

Contact Amy Wilson for more information

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