Can I Use Spousal Support as an Income Source to Apply for a Mortgage?
Author: Kin Ho Wong, Certified Divorce Real Estate Specialist
Applying for a mortgage is a common thing and as a married couple, you may find a need to apply for one. However, research may be necessary when it comes to divorce because its impact on mortgage eligibility can be quite tricky. We recommended doing a consultation with a Divorce mortgage Specialist before your next move for the best result.
Answer: Generally, we believe that all sources of income are seen as a source of income by the recipient while applying for a mortgage but speaking from a mortgage financing perspective not all sources of income are accepted as qualifying income. You should always consider this before proceeding with the mortgage application. For instance, spousal support is one of those tricky sources of income that is accepted as a qualifying source of income however it has a limit. There is a limit to the percentage it makes up of the total income. Also, if sponsor support for the lenders is continuous and stable then it can be considered as qualifying income. In this regard, there must be a Written Divorce Agreement addressing the situation where the amount of spousal support to be paid will be clearly stated. In addition, the document must state how often the spousal support will be paid and for how long it will be paid. With this information, the lender can document your actual income and of course measure what you are qualified to borrow.
Some lenders may have other requirements such as making sure that the spousal support has been paid for six months and must continue to be paid for three years. This may sound crazy, but the lender will want to play safe by making sure that you are capable before your application can be granted. And in some cases, lenders may have other requirements and you must always ask questions and go for the one that suits your capability.
It is very easy for anyone in Canada to be denied a mortgage if their spousal support is greater than 30% of the total income. You need to address this before applying for a mortgage in Canada. Also in Canada, lenders may only accept your loan application if you have other income sources that are more than 70% of your total income. However, it is always advisable that you ask questions or look for possible solutions if your spousal support is up to 30% of the total income. If you intend to buy a new matrimonial home or would like to refinance an existing home then you should ensure that your spousal support is seen as a qualifying income before finalizing the separation agreement to prevent problems in the future.
Speaking with a Family Law Lawyer, Family Mediator, Divorce mortgage Specialist and a Certified Divorce Real Estate Specialist as a team will go a long way because they can render the support needed to qualify for a mortgage, finalizing the separation agreement to help secure your future next home after a divorce and help you make an informed decision (to keep it or list it) for your matrimonial home.
Kin Wong and Elva Lee are a Certified Divorce Real Estate Specialist and Divorce Mortgage Specialist who help Divorce Clients to sell or refinance their Matrimonial home and give them advice which is their best option regarding their Real property and Mortgage.