Going through a divorce is one of life’s most challenging experiences, and buying a home during this time can feel particularly daunting. As a seasoned team of realtors, we’ve supported many clients through this process, and we understand the unique emotional, legal, and financial challenges you may face.
Whether you’re just starting to consider your options or are ready to take the next step, this guide will provide you with the insights and support you need. In this comprehensive step-by-step guide, we’ll explore your financial options and help you navigate the housing market. We’ll cover every aspect to ensure you feel confident and empowered throughout the process.
If you are in the Ottawa-area and are looking for personalized home buying advice, reach out to our team.
You can book a 15-minute call with Adam Mills, our broker of record and author of Navigating Selling Through Separation: Straightforward Real Estate Advice for Uncoupling.
A Step By Step Guide: The Post-Divorce Home Buying Process
- Understanding Your Housing Options During Divorce
- Legal Considerations For Selling A Home During a Divorce
- Financial Planning For Home Purchase After A Divorce
- Mortgage Options for Divorcees
- Navigating The Housing Market During Divorce
Step 1: Understanding Your Housing Options During a Divorce
If you are already separated from your spouse or are just starting the process, remember this: the point of separation is to part ways and get on with life separately. As hard as this might be emotionally, having physical separation is paramount to moving forward. In Ontario, you do not have to live separately from your spouse to be considered legally separated, however living separately can be a freeing step in this process.
If you are moving out of your home during divorce, you can rent for the time-being. It is not necessarily advisable to purchase a home during the separation period as your spouse may claim interest in the new property.
In general, couples can legally file for divorce after 1-year of separation, but during this period you can create a separation agreement that outlines things like who will stay in the family home, if/when the family home will be sold, etc. Once you have a signed separation agreement, you may consider purchasing a new home. Disclaimer: this is not legal advice, we suggest you consult a family lawyer for detailed information on separation and divorce.
Step 2: Legal Considerations For Selling A Home During A Divorce
Regardless of the process couples choose to resolve the issues arising from their separation, the law is consistent in how assets and property distribution are handled. Any variation is based more on context, timing, interpretation and geography, with slight differences from province to province. Some provinces are called “community property” provinces, and others are “equitable distribution” provinces.
Most provinces follow the laws of equitable distribution, which means that the equal contribution of each person to the marriage is recognized, and as such, any property acquired during the marriage will be divided between the spouses in a fair and equitable way.
In equitable distribution provinces, the court determines who receives what based on a variety of factors, such as the relative earning contributions of the spouses. Ontario is an equitable distribution province, however, the treatment of property and the division of the same may be different if you are married or in a common law relationship. Ask your lawyer which laws apply to your circumstances and they will advise you based on your relationship’s legal status along with your combination of assets, investments, property and debt – and the timing, context and geography of each.
Often, one spouse may transfer title of the home to the other thinking they are no longer financially responsible for paying the mortgage, but this is not reflective of their legal liability. Even after transferring title, the loan payments remain the responsibility of all parties on the mortgage.
Whether you or your spouse are staying in the home, in order to remove one party from the mortgage, the other party must obtain financing to buy out the other or use their cash assets to purchase the house outright and settle the mortgage.
Your legal advisor will be able to provide further detail and recommendations regarding any mortgages, quitclaim deeds, and title of property considerations within your separation circumstances.
Step 3: Financial Planning for Purchasing A Home After A Divorce
After the legal considerations of buying and selling property during a divorce, it’s time to start thinking about financial planning for purchasing a home after divorce. You’re probably on your own for the first time in a long time, so it’s time to take a good look at your personal finances including your debts, income, expenses and credit score. Also remember that with divorce may come new and ongoing expenses like child-support, alimony, legal fees, etc.
Having a clear picture of your purchasing power is the first step to navigating the real estate market and will ensure you don’t overextend yourself financially.
Obviously, securing a mortgage is a crucial step in this process. To determine your eligibility, lenders will look at your debt to income ratio, credit score and income stability. You may need to provide your divorce decree, or signed separation agreement, to prove your financial position.
Step 4: Mortgage Options for Divorcees
Depending on the factors listed in Step 3, you may want to consider having someone cosign your mortgage, possibly a parent or relative. This will reduce the lender’s risk and increase their likelihood of lending to you. It’s important to understand what having a cosigner means for you and the secondary signing party. However, it may be the small push you need to secure that loan.
If your credit has remained strong through the divorce process, a traditional mortgage with an A Lender will be best. Just like when you were married you can explore options between Fixed-Rate and Variable-Rate mortgages.
If your credit score has taken a hit, you may want to consider working on correcting that before applying for a mortgage. However, if you’re keen to get the process started, you can work with B Lenders. These usually come with higher interest rates but when you work with a financial advisor or mortgage broker, you can create a plan to get you back with an A Lender.
Shop lenders to make sure you’re getting the best interest rate possible. At this point, we recommend connecting with a mortgage broker. If you’re in the Ottawa area, we can connect with the best mortgage brokers we know. Just reach out to us!
Step 5: Navigating the Housing Market During A Divorce
Finally, you’re at the step where you can start to envision what your new life will look like in your new home. Now it’s time to consider what you need from your home.
Start by clearly defining your housing needs and budget based on your new financial reality. Working with a knowledgeable realtor who understands the intricacies of divorce is invaluable—they can provide insights on market trends, help you find suitable properties, and negotiate effectively on your behalf.
Patience is key; the right home will not only meet your immediate needs but also support your long-term stability and growth. By taking a methodical approach and leveraging professional guidance, you can find a home that represents a fresh start and a solid foundation for your future.
Remember, you are not alone—lean on the expertise of real estate professionals, legal advisors, and mortgage brokers to guide you through each step. If you’re in the Ottawa area and need personalized advice, our team is here to help. With our support, you can confidently make informed decisions that lead to a new beginning in a home that suits your needs and future goals.
Reach out to us to start building a strong foundation for your new life.
