Buying a home after separation?
If you are refinancing your family home as part of the separation process, or purchasing a new home following your separation, support payments can play a big role in qualifying for a mortgage. Understanding how support is calculated can help you in the financing process. There are also many expenses and budget changes related to your divorce that you should consider.
What’s Your Budget? Consider These Factors and Expenses
- Legal fees – Separation Agreement, divorce, making a new Will, real estate fees
- Mortgage fees (e.g. fee for breaking your mortgage)
- Changes to your mortgage payments - they may go up or down
- Fees for appraisals – house, pension, other assets to be divided
- Moving expenses
- Child support, including special expenses such as daycare
- Spousal support
- Life insurance to secure support
- Insurance and benefits that might have been covered previously
- Medical/dental expenses that might have been covered previously
- Changes to income taxes, including credits
- Changes to government benefits
Are you paying or receiving support?
Support can impact your ability to qualify for a mortgage. Understanding support can help you navigate this part of the process.
Child support is made up of two parts: (1) a monthly payment and (2) a contribution to “special and extraordinary expenses” (e.g. medical expenses, daycare). Child support is generally based on the Line 150 income of the payor parent unless there are special circumstances. Child support is paid from your “after tax” income and is not taxable in the hands of the recipient. The parents’ incomes, the parenting schedule, the number of children, and numerous other factors impact the amount of child support payable.
Spousal support can be payable in numerous situations; it is not restricted to long marriages where one party is unemployed, stayed home, or makes significantly less than the other. Spousal support is typically paid from your “before tax” income and is a deduction, and is typically taxable in the hands of the recipient. The amount and duration can depend on many factors, including whether there are children and their ages, the incomes of the parties, the length of the relationship and the ages of the parties.
Who can help?
There are many professionals on your divorce team who can help you through this process. Other than your divorce lawyer, talk to your financial planner/advisor, real estate agent, real estate lawyer, and bank or mortgage broker.