Dealing with a house mortgage in the event of a divorce

Let’s start with some rather stark statistics so you understand that no one is immune from divorce. Divorce is omnipresent in our society; the sad reality is that nearly 67% of all couples who married after 1990 will divorce. Of those, 50% will divorce within 5 years. Whether living common-law or married, you will face the same challenges if you separate.

Even in a growing economy, it is often difficult and expensive to divorce or separate. No one wants to even imagine what it would be like during a recession or at a time like we are currently living through. If you are not in excellent financial health, a divorce or separation can be devastating. Having to sell the family home is often the result.

One of the major issues in a divorce is the family home. Any decision regarding it will be influenced by a number of factors, including the emotional attachment of family members to the property, proximity to your workplace, and the need to maintain a certain stability for your children.

The questions we usually ask ourselves in this situation are:

  • Will the house be kept by one of its current owners? Which one?
  • Do I have the means to keep the house and pay the mortgage alone?
  • Will the bank agree to grant a new mortgage on the house with only one of the owners as the borrower?

In this blog post, we will address the various options available to people going through a divorce.

Selling the house

When there is a divorce, selling the family home is sometimes the only viable option. This scenario is common when a single individual’s salary is not enough to refinance the property or take on the existing mortgage. If the property needs work and you can’t afford it, you could opt for a second mortgage. This would allow you to complete the work required to maximize the value of the property at the time of sale.

How can I keep my house after the divorce?

There are many ways to keep the family home after a divorce. Unless otherwise agreed, the person keeping the house will have to pay the other owner half of the equity and then take on the existing mortgage.

The equity in your home is calculated by subtracting the amount owed on your home (e.g. mortgage balance, home equity line of credit balance) from the market value. Here is an example of how to calculate the home equity:

House value: $500,000

(– minus) Mortgage balance: $300,000

(= equals) Home equity: $200,000

You would therefore have to give your ex-spouse $100,000, which is the available equity divided by 2. If you choose to refinance, the amount to be refinanced would be $400,000.

  1. Buy back your ex-spouse’s share with your savings

    If you have enough savings, you could simply give your ex-spouse their estimated amount of equity. You will still need authorization from the bank to assume the mortgage on your own and relieve your ex-spouse of their responsibility for the mortgage. The bank will ask you to resubmit all the required documents (T4, proof of employment, etc.) to obtain approval.

  2. Refinance with a bank (with or without a co-signer) in order to acquire 100% of the property

    You could opt for bank refinancing to acquire your ex-spouse’s share in the house. We are talking here about traditional bank mortgage financing. You will therefore need to qualify for a mortgage as if you were a new customer. If your salary is insufficient or if you have a bad credit rating, you could try with a co-borrower. A family member is often ideal.

  3. Refinance with a private lender in order to acquire 100% of the property

    If you have good equity in your property but your financial situation or credit rating does not allow you to refinance your mortgage with a bank, there is another option: a private mortgage. Since approval is based solely on the equity in your property, you avoid having to go through a difficult refinancing process.

     

    Such private mortgage loans are often for a short period. This is generally a 12 to 24-month transitional loan that enables you to stabilize your financial and family situation in order to benefit from more options later.

How can I apply for a mortgage loan?

Apply online via our website or call us at 1 (877) 220-7738, extension 1.

Why choose a private mortgage loan to acquire a property

Even though mortgage rates are at historic lows, accessing traditional mortgage loans with banks remains difficult for many borrowers. People are therefore looking for new financing options in order to acquire one or more properties. Whether it is for the purchase of a primary residence or for a short- or medium-term investment, taking out a mortgage with a private lender is becoming an attractive option for many.

1. Who should use a private loan to acquire a property?

If you are in no rush and have a good job, good income, great credit and enough borrowing capacity, then a private mortgage is not for you. You should look at traditional banks for a lower cost loan.

However, there are dozens of situations where private mortgage financing for home ownership is a good option. Here are a few:

  • you are self-employed but have been in business for less than two years;
  • you have to conclude a real estate transaction on short notice and cannot wait weeks for an answer from the bank;
  • you have recently immigrated to Canada and you have a 25% down payment but no credit history;
  • you are self-employed but your declared income in the past 2 years is too low to qualify for bank financing.

2. Why choose a private loan to acquire a property?

Financing a property with a private mortgage should always be considered a temporary solution as you move towards refinancing with a traditional bank. The average loan term is 6 to 36 months.

People opt for this solution for the following reasons:

  1. It’s much faster than a conventional bank. It can take several days for a conventional mortgage loan application to be approved. With us you can make an application in less than five minutes using our secure online form and get a same-day response.
  2. The approval process is so simple. No more endless paperwork and having to meet certain debt ratio criteria to qualify. The approval of our private loans is based primarily on the net capital available on the property.
  3. You will have access to flexible payment terms. Your ability to repay is essential to us. So that is why we offer payment terms that allow you to lower your monthly payments or even prepay the full interest on the loan.

3. What does it take to qualify?

a. The down payment

In order to acquire a property with a private mortgage, you must first have a down payment of at least 25% of the purchase price. For example, if you are buying a property for $200,000, the down payment required is $50,000. If you do not have a down payment but instead have other real estate assets, we can look at the possibility of using the available equity in these other properties to replace or reduce the required down payment. Our mortgage calculator can help you determine the maximum amount available to finance on your property.

b. The location of the property

In order to obtain approval for private mortgage financing, the property you wish to acquire must be located in an urban area of ​​more than 25,000 inhabitants. The regions we mainly serve are Greater Montreal, Quebec, Sherbrooke and Gatineau. If the property is not located in an urban area, we can still evaluate your application for financing, but with a lower loan-to-value ratio.

How can I apply for a mortgage loan?

Apply online via our website or call us at 1 (877) 220-7738, extension 1.

 

Is Refinancing A Private Mortgage With Another Private Lender Worth It? – Follow up

Our article Is refinancing a private mortgage loan with another private lender worth it? Aroused much interest. Several clients have contacted us claiming they had been solicited by other companies in order to refinance their private mortgage loan currently with Victoria Financial Inc. Following the discussions we had with these customers, we thought it was important to write a continuation of the article.

The cocktail of fees often between $ 7,000.00 to $ 15,000.00 is not the only factor to consider when considering a change of private lender. Here are other things to think about.

Does the private lender presented to me have a good reputation?

A good way to check is to do a short Google search with the name of the private lender, and then see if he has a good rating. In addition, testimonials available online on Google business, Facebook or LinkedIn can be viewed to find out the opinion of other customers.

Since when are they in business, and who are the administrators? You can get this information for free on the Registraire des entreprises.

Does the new lender offer the option to renew the loan when it is due?

It is important that you do not hit a wall at the end of your new private mortgage loan. You must therefore make sure that the deed of hypothec you are about to sign contains a clause regarding the renewal of the loan.

In conclusion, if the private lender does not offer a renewal, you will need to make sure that you have the funds available to repay the full amount when the loan expires.

The switch can be very expensive; here is a true story experienced by one of our customers.

Most recently, the loan of one of our clients was due. Despite the renewal offer he received, he did not contact us to discuss the options available to him.

A mortgage broker solicited him via mail to invite him to change private lenders. The new lender presented offered a lower interest rate, all of which sparked a tantalizing economy.

However, this lender required several fees that proved to be more expensive than those requested for a renewal with us.

Here is a comparison chart of the two options available to this client :

  Current financing with Victoria Financial Financing offered by the new private lender
Loan amount $ 60,000.00 $ 80,000.00
Interest rate 15% 12%
Initial lending fees $ 1,250.00 (renewal) $ 6,500.00 (initial fees)
Brokerage fees Not applicable $ 3,500.00
Notary fees Not applicable $ 2,050.00 (mortgage, release and title insurance)
Monthly payments $ 750.00 $ 800.00
Total cost of interest $ 9,000.00 $ 9,600.00$
Total cost of the loan $ 10,250.00 $ 21,650.00
Cost of borrowing percentage 17.08% 27.06%

In summary, the client’s cost of borrowing went sky high at 27.06% and it cost him more than $12.000.00 in transitional fees to earn a residual amount of only $8,000.00$.

CAs you can see, the idea of a lower interest rate was tempting at first sight. However, when the client realized the magnitude of the fees once he was at the notary’s office, he was not at all excited by the idea!

On the other hand, he had already signed an agreement with the new private lender as well as with the broker. He was therefore bound to them without being able to go back. The cancellation of the financing contract would have cost him a cancellation fee representing brokerage fees, processing fees and notary fees totaling $ 12,050.00.

How can you make a more informed choice?

We always recommend that clients contact their original private lender. Unknowingly, customers sometimes have the option of obtaining an additional disbursement or to capitalize part of the interest in order to reduce their monthly payments. These options do not require the intervention of a notary, which helps minimize their costs.

In almost all cases, switching to a private lender is an option to avoid. The related costs are important and too often presented to the client at the last minute at the notary’s office.

If you have any questions regarding your mortgage renewal with Victoria Financial or if you would like to refinance your private mortgage with us, please contact us so that we can enlighten you.

You can fill a contact form via our website or call us at 1 (877) 220-7738, extension 1.

Is Refinancing A Private Mortgage With Another Private Lender Worth It?

Do you have a private mortgage loan with a private lender that expires soon? If so, are you going to try to refinance with a bank, simply renew the loan, or switch private lenders?

Refinancing with a traditional bank is the ideal scenario. However, this option is available to everyone. If you are thinking of switching private lenders, ask yourself why you are moving towards this direction. Is it because you need more funds? Is it rather the monthly payment that you find too high?

In any case, we recommend that you first contact your current lender to see if it is possible to change the terms of your private mortgage to better suit your current situation.

Following your verifications, are you still thinking about refinancing with a new private lender? Here are the important points to consider.

Legal fees – $ 1,500.00 to $ 2,400.00

In the first place, there are the notary fees to prepare the release of the current private mortgage. These fees can vary between $ 600.00 and $ 900.00.
In addition, notary fees will be incurred to prepare the mortgage of the new loan. Costs between $ 1,000.00 and $ 1,500.00 are to be expected.

Appraisal fees – $ 400.00 to $ 500.00

To ensure the marketability of your property, many private lenders do business with licensed appraisers. Appraisal fees will often be charged before your loan is confirmed.

Brokerage fees – $ 3,000.00 and more

Was the new lender introduced to you by a mortgage broker? If so, there is very likely a brokerage fee to consider. In the area of private mortgages, mortgage brokers usually charge a brokerage fee of 3% to 5% of the loan amount.

So, for a refinancing of $ 100,000.00, you can expect a brokerage fee between $ 3,000.00 and $ 5,000.00 and of up to $ 15,000.00 for a $ 300,000.00 private mortgage. And then there’s the charlatans who charge even higher fees than these listed above.

New private lenders initial lending fees – $ 3,000.00 and more

Finally, the new lender will also charge you for initial lending fees. These fees range from 3% to 5% of the loan amount, with a minimum of $ 3,000.00.

Is it worth it? Our recommendations.

In summary, this cocktail of fees must be taken into consideration when changing private lenders. It is not uncommon to see a customer pay between $ 7,000.00 to $ 15,000.00 only to earn a few thousand dollars more. Quite often, the clients have not done their homework and realize their mistake at the notary’s office.

It is therefore important to make calculations to determine which of the options is the most lucrative for you. In most cases, renewing the existing loan is the best option for the client.

If you have any questions regarding your mortgage renewal with Victoria Financial or if you would like to refinance your private mortgage with us, please contact us so that we can enlighten you.

You can fill a contact form via our website or call us at 1 (877) 220-7738, extension 1.

60 day notice: 3 ways to avoid losing your property

Receiving a 60 day notice, also known in legal jargon at a notice of exercise of hypothecary right, from a mortgage lender is a stressful situation, given that it can lead to the loss of ones’ property. Nobody wants to lose their home. Most people do not have extensive knowledge in the legal field, and are often times poorly advised by friends or family, mortgage brokers or real-estate brokers.
Here are 3 ways to avoid losing your property after having received a 60 day notice:

1. Correct the defaults noted in the 60 day notice

This is the simplest solution. The notice of exercise of hypothecary right will list the different reasons why you received said notice. If it is due to monetary issues (ex. late payments, property tax payments), you must reimburse the amounts due in order to terminate the notice. You can borrow money from your friends or family or obtain a second mortgage if your property equity allows for it.

2. Reimburse the mortgage debt in full via private mortgage refinancing

Given the fact that your credit is probably damaged, you’ll have to opt for private mortgage refinancing. By working with a private mortgage lender, such as Financière Victoria, you can opt for refinancing of up to 75% of the property’s value. By reimbursing the mortgage lender, the 60 day notice is terminated.

3. Sell your property

This is the solution that the vast majority of debtors don’t want to consider. But unfortunately it is your only solution if you do not have the funds available to fully reimburse the amounts you owe the mortgage lender within the required deadline. The use of a realtor is strongly recommended in order to develop a good strategy for a quick sale.

If you have received a 60 day notice, or if you are presently looking for private mortgage financing, please contact me at maxime.st-laurent@financierevictoria.com or by telephone at 1 (877) 220-7738 Ext. 101.

What “lease-to-own” or “rent-to-own” promoters won’t tell you

Over the past several years, “lease-to-own” programs, also known as “rent-to-own” programs, have become very popular. They are frequently offered as a second option for alternative financing. Whether the program is promoted by mortgage brokers, telemarketers or individuals, this option seems interesting on the surface, as it allows you to remain in your home while also being able to buy it back in the future at a predetermined price, oftentimes the financing price plus 5% per year.

An uncertain buyback

In addition to the numerous clauses in the contract that can eliminate your ability to buy back your home (ex. default on payment) there is another factor that the client doesn’t control: the financial stability of the property purchaser.

You can lose your life savings

Below is a real case which was told to me by a client less than a month ago.

             Mr. Paradis had financial problems and his financial institution had sent him a 60 day notice. He risked losing his home at any moment. After being advised by a mortgage broker who was a member of a large Quebec-based brokerage firm, he opted for a “lease-to-own” program.

             On completing the sale to the notary, Mr. Paradis met Mr. Bélanger, the real-estate investor who acquired his property in order to “temporarily” rent it to him to then allow him to buy back his home. Mr. Paradis believed that the property would be repurchased by a recognized company, not an individual. After having been reassured by the mortgage broker, he went forward with the transaction and sold his property, worth $250,000, for $150,000, with the option to buy it back the following year for $157,500.

             Then the unexpected happened. A Revenue Quebec legal mortgage for the amount of $153,453 was registered on Mr. Paradis’ property. In reality, Mr. Bélanger, the real-estate investor, had not paid his taxes relating to previous real-estate projects and did not have the means to pay them in full. Now in financial difficulty, Mr. Bélanger ceased his monthly payments on the mortgage and the bank sent a notice of exercise of hypothecary right in order to seize said property.

 In addition to losing the full equity that he had in the property, Mr. Paradis and his family once again faced the risk of eviction…

Renter’s recourse

In the majority of cases similar to this one, the only recourse available is to sue the owner. Given that the owner is in financial difficulty, it would most likely be impossible to recover the lost amounts.

Why would obtaining alternative financing have been a better option?

Obtaining refinancing or a second mortgage with an alternative mortgage lender would have allowed the client to keep their home in their name and avoid being exposed to the risks that occurred in the case cited above.

If you have additional questions about alternative mortgage financing, or if you are currently looking for alternative mortgage financing, please contact me at maxime.st-laurent@financierevictoria.com or by telephone at 1 (877) 220-7738 Ext. 101.