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Separation agreements, they are the key component required when looking to purchase a home.
In today’s world, mortgage and lender qualifications become complicated with a “separated” marital relationship status.
If you’re married or civil partners seeking a legal separation, decisions about the house and mortgage will form part of the agreement. It’s not possible for one party to take themselves off the mortgage without having written approval from the other party to do so.
A written separation agreement defines the terms as how the matrimonial home shall be divided. It can be sold. One party can purchase the home from the other partner. The current equity in the home can even be used as the down payment as long as it is written in the agreement. It defines child support and or alimony payments. Lenders require this to confirm who is paying the child support or alimony, If paying, it now becomes a debt. The payment must be included as a liability. This can affect your debt ratios when qualifying for a mortgage.
If you are on the receiving end, it is also extra income which can be used to help you qualify. Each lender has their own set of rules as to how much can be used to help debt service a new mortgage. Some lenders calculations are more favourable than others which can increase your purchase price.
You do not want to purchase a new home without a separation agreement especially if using joint funds as the party who didn’t purchase may have rights to this home. They would be required to give consent for you to purchase or sign dower rights.
Before making a change, consult with a divorce lawyer. They specialize in divorce and separation agreements. A meeting with a good mortgage broker can help guide you with some information prior to your lawyer appointment. It may save you some time at the lawyers office if some of the information is already worked out.