Buying back your partner’s share of the house
What happens to the house when a couple separates? If both spouses are owners of the property, they must find a common solution. The most obvious one is to sell the house, pay off the mortgage, and then split the remaining proceeds. But what if one of the spouses wants to keep the house? Then the spouse in question has to buy back the other’s share. Here’s what you need to know about selling or buying back a share in a house in the context of a separation.
Selling the house
As pointed out in the Government of Quebec website, JuridiQC, all co-owners must agree on a number of points when selling a house:
- Conditions of sale
- How transaction costs will be shared
- After the mortgage has been repaid, how the remaining capital will be shared
- Each person’s responsibility for property expenses until the transaction is completed
When you team up with a real estate broker when selling or buying, you receive invaluable advice and guidance through all stages of the transaction.
Buying back a share of the house
The spouse who wants to keep the house must buy back the other one’s share. This sale must be based on an evaluation of the property’s net worth. This is calculated by determining the total value of the house, and then deducting the mortgage balance and mortgage prepayment penalty.
How do you calculate the value of a house? Both parties must agree on a valuation method. While the municipal property assessment could be used, it may differ from the actual resale value.In an article using various real-life examples, La Presse advised that each spouse get independent assessments of the home’s value.
If you want help getting a neutral evaluation, contact a real estate broker or notary.
What if there is no agreement?
If you cannot come to a mutual agreement, the site JuridiQC advises using a mediator. If, after this recourse, you still cannot agree, the site indicates that you can file an “Application for partition of an immovable property held in undivided co-ownership” in court.
Sharing the down payment
When buying a property, spouses often do not have the same financial capabilities. This means that their respective shares of the down payment may differ.
With input from a notary, La Presse pointed out in another article that the ideal solution would be to agree on a formula that takes into account each one’s investment as well as the return and inflation.
If you do not come to an agreement, and “if nothing is stipulated in the purchase contract, the Civil Code of Quebec provides that each of the spouses is presumed to own an equal share of the home.”
About the mortgage
The spouse buying back the other’s share in order to keep the property will have to obtain a new mortgage. This person must therefore ensure that a financial institution accepts to grant them a new mortgage (they do not need to take out a mortgage with the same bank).
You can refinance the home up to 95% of its value if used to buy back the spouse’s share. (Source: mortgageimplifiee.com).
This high percentage is an exception
to the rule that only exists when refinancing in this type of situation.
Seek the help of trusted professionals
The purchase of the spouse’s share in a common property is a complex process filled with potential pitfalls. Use the services of a notary, mortgage broker and, first and foremost, a real estate broker. They are sales professionals whose role is to protect your interests during the transaction