Mortgage 101 – Protecting Financial Interests in a Relationship

This segment Clinton and Todd continue their chat about love and home improvement with an emphasis on the factor love plays in buying a home. They chat about planning for relationship breakdowns, spousal buyout options, and financial honesty and transparency in relationships.

Relationship breakdowns and planning

Todd Veinotte
Oh Oh, love hurts. You know when love really hurts?

Clinton Wilkins
I can tell you there, it hurts when you have a breakup.

Todd Veinotte
That’s right, when you gotta break up and you got a mortgage and you got a bunch of stuff that you got to divest? Oh, that’s not a good situation.

Clinton Wilkins
No, that can certainly be a very challenging situation. And Todd, I’ll tell you, half our files have a family issue. Family law, challenge.

Todd Veinotte
Half of your files? Wow

Clinton Wilkins
I would say half of them. Either, you know, someone’s getting divorced, someone’s getting separated, people are getting together, they’re getting married, they’re getting remarried. Half our files have some something that complicated.

Todd Veinotte
How much of that could be avoided with some planning?

Clinton Wilkins
And I think certainly a big portion could be avoided. No one ever thinks their relationship is going to break down. You know, I think we are just so optimistic, as people.

Todd Veinotte
That’s a good thing!

Spousal buyout options for matrimonial properties in Nova Scotia

Clinton Wilkins
And you know, February is a great time to celebrate your relationship, but celebrate all year long. I think sometimes these relationships break down for things that we talked about last month in Merry Debtmas. Sometimes it’s debt that’s what makes these relationships break down. Sometimes its that they don’t like the person anymore. Okay, that’s cool, whatever. But I think that when a relationship does break down, there’s a business aspect to it as well. It’s not just the emotions. You know, especially if you own a piece of real estate together, that can be a big challenge for people. Especially if it’s a matrimonial home. Certainly there are laws in Nova Scotia, that protect married people, whether they’re on the title or not; there’s the Matrimonial Property Act. So for example, if a couple owns a property, but only one person’s on the title, if they’re legally married, the other spouse does have legal rights to that property as well. So that’s one thing. And you know, there’s certainly some programs out there specifically for people that are going through a matrimonial breakdown. There’s a product called a spousal buyout, and you can buy out your spouse up to 95% of the market value of the property. So, that would be just the same as you going to buy a new property and putting down 5%. You can do a spousal buyout up to 95%. So it’s, it’s something that not a lot of people know about. Normally, when you think about doing a spousal buyout, you think about doing a refinance, and just okay, I can refinance up to 80%, that’s all I can get. I can’t access any more equity. But, the interesting thing with this spousal buyout program up to 95%, you can also pay out an equalization payment to your ex. You can pay out any joint debts, as long as you pay them out and close. Like, if you had a line of credit or loan together, or credit card together, you could pay that out as well. As long as that’s stipulated in the separation agreement, then we’d also get a private purchase and sale agreement to make sure that last 5% does not need to be repaid. Great, great, great program. And I think it’s a program that not a lot of people know about. So if you’re going through a separation, you know, seek the advice of an unbiased mortgage professional. They know about these programs that maybe a normal bank branch they wouldn’t know about. Because, there’s not a program, you know, that the bank that when they click through their system, there’s not a program available. But this is something that the insurers will do. Like the Canadian Mortgage and Housing Corporation spousal guarantee. They’re very, very aware of spousal buyouts. And we do them all the time. It’s a great, great program, especially for the spouse that wants to keep the matrimonial home. We see this a lot for people that have kids. One parent loves keeping the matrimonial home, so it gives the stability to kids. Because, you know, it’s a tumultuous time.

Todd Veinotte
Yeah, absolutely. So do you have these conversations with people? It’s difficult, obviously, when people are in love, and things are going well, but when do you broach the topic? Or do you broach the topic? Or do some people have the, I guess the the wisdom to and the maturity to be able to say, or do you lead going into these things?

Clinton Wilkins
I think very few people get a cohabitation agreement that are not married. I really think that this is a legal mechanism and document that you should be getting the advice for. You know, if you’re buying a house with your spouse, if you’re not married, you should get your financial terms down on paper. A lot of things change over time. And you know, it’s good to make sure that you’re protected. Specifically, if there is a situation that there’s not quality. So for example, sometimes two people buy a house together, we see this all the time, and one person puts up all the down payment, and the other person is basically just on the mortgage on the title. So you know what their intention is, that person will get the down payment back and then maybe we’ll split the remaining equity. It’s good to get these things down on paper. You know, it’s a lot easier to make an agreement when things are good. And I can tell you people get wild about two things Todd, one is money, two is kids, and oftentimes in a matrimonial breakdown, there can be one or the other, or both. So really get your intentions down on paper. And I would say it’s even more important if you are not married. To get a cohabitation agreement.

Todd Veinotte
How often do you see a purchase made by home? And you know that one of the two, whatever the dynamic is, is not quite happy with the purchase? Does that happen sometimes, and you just realize?

Clinton Wilkins
Well, sometimes, you know, maybe the relationship is rocky already. Yeah. You know what, you just get that sense! Yeah. And I can tell you, those people, they get a variable rate, hell or high water. You know, what I have had so many couples break up. I don’t know, I think during the pandemic, people either got a divorce right away, or they stayed together, because it was just like, hey, we need housing, and we’re just gonna fight this out. But now things are getting more into a normal situation. I would venture to guess if we had a family lawyer on the show, they would say that the amount of separations and divorces have gone up. Really, I think 2024 people are pulling the plug, baby.

Todd Veinotte
Yeah, Yeah. So when it comes to people, sometimes when they get together to do a mortgage, and to get to that place, or they’re renewing; sometimes some surprises come up financially as to what’s been going on with the other person’s finances. And, I’m sure you see that on a very regular basis, right?

Pre-approvals for home purchases and financial transparency in marriage

Clinton Wilkins
People do not talk about their finances. As much as for the last six years, we’ve been breaking down the barriers for the show. Talk about financial literacy, talk about open your mail, talk about have your Wine Wednesday, or whatever, and, you know, open your bills and talk about your finances and your credit and your income and your assets. People are just real solo operators. And maybe that’s why you’re having matrimonial breakdown, maybe you’re not talking about your problems. The whole point about being in a relationship is you can work on these problems together. And I think being open and honest with your spouse is a great way to do it. I mean, we’ve all had breakups. Let’s be honest. I’ve had I’ve had some Todd, you’ve had, we all go into these relationships, really optimistic. And I think if you’re not going to be opening, you’re not going to share, finances are, such a big, you know, issue. And I think it’s just one thing that, you know, many couples just have not been able to, you know, break that barrier and really be honest with each other. So I see them in my office, and sometimes, you know, I’ll get a little email or call to be like, “Hey, I have this secret credit card that I don’t want my spouse to hear about,”

Todd Veinotte
Can you hide it? No

Clinton Wilkins
Or Yeah, be like, I don’t want you to tell them about this one, or I have this secret bank account I don’t want them to know about. And you know what, I am all about protecting people’s privacy. But sometimes you just have to be open and honest. And sometimes this is a roadblock that you just cannot get past. And sometimes I have to be the bearer of bad news.

Todd Veinotte
How often? When you’re having a couple, whatever the dynamic again, across from you. Are there discussions about how much they want to spend, and there’s disagreement on how much that they should spend? And how much coaching do you do when it comes to that want to need scenarios and locations? And all of that. I’m sure there is a bit of marriage counseling.

Clinton Wilkins
Yeah I do see it. It’s oftentimes when it comes to a pre approval. Yeah, I think right now. For an example, the average house price in HRM, is somewhere around $500,000, here in Halifax. And I see people who want to get a pre approval for 300,000. And I see people who want to get a pre approval for 600,000. And typically, what I say is, right now the average home price is 500,000. Let’s get a pre approval in place for the maximum that you can afford. So then when you find this dream place that you want to buy, you know what the payment is going to be, and you know that I can get you approved. Because I think sometimes one spouse is already there. They know what the expectation is, but the other one just hasn’t, you know, got there yet. And that’s a conversation those two need to have together. But I think it’s my job just to make that path so much easier. So then when they’re both on the same page, they know they’re good to go and that they can proceed.

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