Obtaining a mortgage to finance the amount of the cash payment does not present any particular difficulty. It is a routine financial transaction that banks and specialized establishments are fully aware of. The following advice and our various files on the cash purchase will guide you step by step to carry out your operation.
Calculate the amount of the cash payment
Sharing the community
Whether you are married under the community system, civil partnership or common-law, you probably – with some exceptions – bought your principal residence as part of joint ownership.
After the divorce decree, each joint owner remains the owner of his share, that is to say in proportion to his financial participation.
Let’s take a simple example. If the sale price of the family residence is estimated at $ 250,000 (once the capital remaining due on the current mortgage is deducted), the ex-spouses will be at the end of their owner union each up to half, c ” i.e. $ 125,000 if the joint ownership is 50/50. If one of the spouses wishes to keep the accommodation after separation and become the sole owner, he must buy back the share of the other by paying compensation equivalent to the amount of the share. This is called the cash buyout. He will thus have full ownership of the accommodation.
Note: it is possible that the co-purchasers have chosen a different distribution (60/40, 70/30 or other).
Calculation of the share of the ex-spouse
The balance is determined in 2 steps:
- Valuation of the main residence. The appraisal can be carried out by a real estate agent, an expertise firm or by a notary. (1) If the divorce proceedings take place in a conflictual context, you may have to call on 2 independent establishments, each spouse choosing his own, but if you separate amicably you can probably freely fix the selling price.
- Calculation of the amount to be paid to the ex-spouse. To do this, you need to do the following:
(Sale price – capital remaining due) / 2
Let us return to the previous quantified example with a capital remaining due (2) on the current loan of $ 120,000.
($ 250,000 – $ 120,000) / 2 = $ 65,000
(2) : some notary firms have the Notexpert label, which attests to their know-how in the field of real estate appraisal. These firms benefit from specific training and can rely on the nation file of notaries. (2): the capital remaining due is shown in the amortization table which was annexed to the loan offer.
Financing the balance
To finance the repurchase of the balance using a mortgage, you must take the same steps as for a new acquisition, build a file as for a conventional loan and respect the usual rules namely:
- Not to exceed a debt ratio higher than 33% (taking into account the monthly payments of the loans in progress)
- Keep sufficient living allowance to pay for all current expenses.
- Benefit from a stable professional situation (CDI).
- Present bank accounts without payment incident (no check or direct debit refused).
Note: the payment of support is taken into account in the calculation of debt.
Redeem the current mortgage
It is sometimes necessary to renegotiate the current loan at the same time as the mortgage to buy the balance. The monthly payments of the old loan may indeed become too heavy for a single salary.
Again, be aware that banks are well versed in this type of transaction and quite easily agree to renegotiate when the context of the divorce requires it.
If, however, your bank refuses to integrate the old loan into the financing of the balance, nothing prevents you from having it repurchased by a competing bank. Note: you must take into account the prepayment penalties of 3% on the principal remaining due, unless you had taken care to have them removed.
Important: if you keep the old loan, you will have to ask the bank for the separation of the non-beneficiary spouse. The spouse who remains in the premises must then undertake by notarial act to reimburse the monthly payments alone. Note that if the bank refuses, the two co-borrowers remain jointly and severally liable for the reimbursement.
As in the case of a bridging loan where the bank accounts for the balance of the resale of the old home, the calculation of the personal contribution takes into account the share of the beneficiary spouse. In our example above, it would amount to $ 65,000.
You cannot take advantage of government-subsidized loans because they are intended for a first purchase. The PTZ for example cannot in any case finance a cash payment. On the other hand, the current zero rate loan can be kept on condition that the accommodation remains the main residence of the beneficiary spouse.
Notary and warranty costs
The spouse who buys the accommodation must pay the transfer tax on the amount of the balance. However, it is exempt from sharing rights of 2.5%. As a reminder, the notary fees amount to around 7.5% of the amount of the cash payment. It will also be necessary to finance warranty fees (usually a mutual deposit) and the administration fees.