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Home is where the heart was: when to sell the matrimonial home

Separating spouses must often set aside emotional attachments and consider what they can afford when deciding whether to keep or sell the matrimonial home, says Toronto family lawyer Erin Chaiton-Murray.

“It can be a very significant issue,” says Chaiton-Murray, Senior Associate with Fogelman Law. “It varies depending on what stage of life you’re at when you separate, but it doesn’t make the decision any easier.”

Chaiton-Murray says she commonly encounters clients who feel strongly about staying in the matrimonial home, but they are not sure if they can afford it — particularly in the hot Toronto housing market.

“It can be difficult,” she tells AdvocateDaily.com. Not only does the individual have to be able to afford taking on their ex-spouse’s half of the mortgage, but they must be able to handle monthly expenses as well.

“One of the first things I do when a client says they want to find a way to buy their former spouse out of the house, is tell them that they need to sit down with someone at their bank,” Chaiton-Murray says. “They need to go through the usual process of applying for financing and see what they will qualify for. Because if what they qualify for is significantly less than what will be required to purchase their former spouse’s interest in the home, there may not be much to discuss.”

As individuals going through separation and divorce are often dealing with raw emotions, Chaiton-Murray says she tries to play the role of an objective third-party, pointing out their options and suggesting that they consider what is realistically affordable.

“On occasion, I will have joint conversations with my clients and their bank representatives or financial planners, and we talk through the numbers,” she says. They examine the client’s income, what they may receive through child or spousal support payments and what their monthly costs will be after buying out the other spouse.

“We determine if it actually makes sense or if they’ll be overextended,” she says. “When people are emotionally tied to the house, that can be a really difficult conversation, and it can be a difficult thing to persuade them to think realistically.”

Issues around mortgage affordability for individuals going through a divorce impact all ages and life stages, Chaiton-Murray notes. For people closer to retirement, there may be more on the line if the house is paid off and has gained value over many years. Often, the family home holds many memories that are difficult to part with.

Financing challenges have led to some creative solutions including the “divorce mortgage” in the United Kingdom, according to The Telegraph.

According to the proposal, the soon-to-be ex who wants to remain in the home would borrow enough to buy out their former spouse, the article says. The bank would also lend the person staying put extra money that would go into a savings account and be used to pay the loan interest over a set period of time. At the end of the loan’s term, the borrower could sell the home and pay back the lender from the home equity or take on the full mortgage.

Chaiton-Murray says it’s an interesting idea, but individuals may still run into problems with affordability.

“Chances are, if you couldn’t qualify for the financing in the normal course, the reason is that it’s going to be too expensive for you to carry,” she says. “I would have similar concerns with any alternative financing model.”

For people who are emotionally attached to their homes, Chaiton-Murray finds that often, a little time does wonders for helping them see things clearly.

It also helps to point out they may come out ahead financially if they sell the house — even if they split the proceeds with their ex-spouse.

“It’s possible that everyone ends up doing better that way, especially in Toronto right now, if you can take advantage of the increase in our real estate market,” she says. “And the other spouse may be pushing to have the house sold as well because they recognize the same thing.”

 

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