No one enters a marriage expecting to separate or divorce, but it happens – and when it does, one of the big questions that arises is: What do we do with the house? Whether one person keeps the home or you both decide to sell it and buy new houses, understanding how a separation agreement factors into mortgage decisions is essential.

Why You Need a Separation Agreement

When applying for a mortgage after separation, lenders need to see a separation agreement, particularly when children are involved. This agreement clarifies who is responsible for child or spousal support payments.

Lenders treat these payments like any other debt – similar to a car loan or credit line – and they factor them into their calculations. This can limit the borrowing power of the person making payments, but can work in favour of the recipient, potentially increasing what they can qualify for.

How Support Payments Impact Mortgages after Divorce

• For the Payer: Monthly support payments reduce borrowing power since lenders view them as fixed financial obligations, similar to debt.
• For the Recipient: Depending on the children’s ages and other factors, support payments may boost the recipient’s borrowing power, making it easier to qualify for a mortgage.

It’s crucial to have your separation agreement in place before purchasing a new property. Without it, lenders won’t have the full picture of your financial obligations, which can slow down or complicate the mortgage approval process. If you’re not sure where to start, I would be happy to connect you with a family lawyer.

Please reach out with any questions regarding your mortgage. If you’re looking to get pre-approved for a mortgage to buy a property in Edmonton, fill out my online application. I’m here to help you every step of the way.

About Jason Scott, Edmonton Mortgage Broker

Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’ll be your trusted partner who will help you get the right mortgage for your family home or Investment property. I’m Jason Scott, and I’ll be your Mortgage Broker in Edmonton.