Don’t Let Closing Costs Catch You Off Guard

First-time homebuyers are often on a tight budget, where every dollar is carefully accounted for. Yet, many report confusion when told how much money to bring to their lawyer’s office to complete their home purchase. It’s often thousands more than they expected. Why is that? And how can you better prepare yourself?

Today we will focus on the three biggest items that come up quite frequently as unexpected costs: property tax adjustments; mortgage interest adjustments; and PST on mortgage-default insurance. We don’t count items like land transfer taxes because they are (mostly) expected.

Property Tax Surprises

There are two ways property taxes can surprise you on your closing date.

1) The seller may have already paid property taxes for the full year, and as such is entitled to a credit for their unused portion. We call these prepaid property taxes.

Suppose your annual taxes are $7,200 and your seller prepaid the full year. With a closing date of August 13, you need to give back 140 days worth of taxes. That’s just over $2,760.

2) The other way property taxes can surprise you is when your mortgage lender is going to take a fixed amount for property taxes from your bank account along with every mortgage payment.

This means they are going to accumulate the taxes for you, and remit from time to time to your municipality.

They always start things off by collecting a few months’ worth upfront. It varies by lender and also by where we are in the calendar year. Don’t be surprised if it is three to six months’ worth of taxes. You can see how this adds up if your property taxes are $7,200 per year.

The Mortgage Interest Adjustment Surprise

Every mortgage has an interest adjustment date, which is the date from which your mortgage lender first starts calculating the normal ongoing interest you will pay.

When you close your purchase mid-month, you might have to prepay a few days’ interest on your closing date—it is called an interest adjustment, and it’s to address the stub period between the closing date and the beginning of the first payment cycle. Your lawyer should explain all that when you go to sign the papers.

The details will depend on your specific lender and how they approach this interest adjustment date. Some mortgage lenders will set your first payment exactly one payment period after your purchase completion date. In that case, the stars are aligned perfectly, and you can skip to the next section of this article. No Interest Adjustment for you.

Other lenders might prefer to collect from you on the first day of the month. And in this case, unless your purchase date is also on the 1st, there will be a partial month’s worth of interest your lawyer will collect from you, to adjust things until everything aligns perfectly.

Here is an example where you borrow $869,400 with, say, a 5-year variable interest rate of 1.86%:

• Your closing date is August 13, 2020
• Your first scheduled payment is set for October 1, 2020.
• Your Interest Adjustment Date is September 1.
• Your lawyer will collect an interest adjustment from you for the period August 13th to September 1.
• That would be an extra $840.56 you may not have been expecting.
• This adjustment comes into play, whether you choose monthly, weekly, biweekly or semi-monthly payments.

Neither way is wrong or right, they are just different, and result in a difference of how much money you need on your purchase closing date. As Rob McLister wrote here, “keep in mind, it is possible to avoid interest adjustments altogether. To do so, you need to schedule your first mortgage payment exactly one payment period (e.g., one month) after your closing date.”

The Provincial Sales Tax (PST) Surprise

If your down payment is less than 20% of the purchase price, you must purchase mortgage-default insurance (MDI) to protect your lender in case you fail to maintain your mortgage payments.

How much are we talking about for MDI insurance?

Well, if your down payment is less than 10% of the purchase price, this one-time MDI premium is 4% of the loan amount. But, you must pay Provincial Sales Tax (PST) on the insurance premium, and that must come from your own pocket and cannot be added to your mortgage.

As for the MDI premium itself, pretty much everyone just adds this to their core mortgage balance, and repays it over the life of their mortgage.

Suppose you want to buy a $900,000 townhome in Vaughan, ON, with a $65,000 down payment. Note that if you are going to put less than a 20% down payment on your home, then you must have mortgage insurance. This means your initial mortgage loan request would be $835,000 (cost of home – down payment).

Now you must factor in your insurance premium (4% of your initial mortgage loan amount). This would add a hefty $33,400.

But that’s OK, that $33,400 will simply be added into your total mortgage loan amount. It will be paid over time and included in your regular mortgage payment. So now your total mortgage loan amount is $869,400 (mortgage loan + insurance premium).

Remember our first point?

You must pay PST on the MDI premium, and that must come from your own pocket and cannot be added to your mortgage.

If you live in Ontario, you will pay 8% PST on your insurance premium to your real estate lawyer, which in this case is an extra $2,672* you may not have planned for, and this you must pay out of pocket.

*8% PST of $33,400 (insurance premium) = $2,672

PST Rates Across Canada: 

• 8% Ontario
• 7% British Columbia
• 0% – In Alberta, Yukon, Nunavut and the North West Territories, you do not have to pay PST.

You can also find your provincial sales tax rates here.

The Takeaway

You can see how these three items could add up to a sizeable sum. In our example, they total more than $6,000, but the actual costs will be different for each buyer. For these specific items, it will come down to:

• Is your down payment less than 20%, and thus you have an insured mortgage?
• Do you live in a province where you are subject to PST?
• Will your lender collect property taxes from you, or will you pay them directly?
• Did your seller prepay the property taxes on the property you are buying?
• How does your seller establish the Interest Adjustment Date?

Beyond these three potential surprises, there are other items that could become surprise closing costs: Top Ten Things You Need to Budget For When Buying a Home.

You need to understand which of them might pertain to your circumstances, and don’t wait till the last minute to find out. Your real estate lawyer, mortgage broker and real estate agent are all excellent sources of information about your home purchase. Don’t be afraid to ask!

–Ross Taylor

Home Prices Set New Record High, Sales Surpass Pre-COVID Levels

Continuing the upward trend that started in June, home sales bounced back to pre-COVID levels in July, soaring 30.5% year-over-year.

Home prices, too, set a new record high of $571,500, a 14.3% increase from July 2019, the Canadian Real Estate Association reported on Monday. Excluding the higher-priced markets of Toronto and Vancouver, the national average would be $454,500.

“What a difference three months makes, from some of the lowest housing numbers ever back in April to the multiple monthly records logged in July,” said Shaun Cathcart, CREA’s senior economist. “A big part of what we’re seeing right now is the snapback in activity that would have otherwise happened earlier this year. Recall that before the lockdowns, we were heading into the tightest spring market in almost 20 years.”

Another metric that shows sellers once again with the upper hand in most markets is the sales-to-new listing ratio, which is at 74%, the highest it’s been in 18 years, noted RBC economist Robert Hogue. A balanced ratio is between 40 and 60% and anything below 40% is considered a buyers’ market.

“COVID-19 did not destroy this year’s spring market—it mostly delayed it,” Hogue said, noting the busy spring market activity is now taking place during the summer, a traditionally slower period for home sales.

“We expect further unwinding of pent-up demand to keep sales brisk in August and perhaps September before cooling later this year,” he added.

Historically low housing supply is also contributing to this unusual situation of a hot real estate market occurring while unemployment is still above 10%.

There were just 2.8 months of inventory available, meaning that’s how long it would take to liquidate current inventories at the current sales rate. That’s the lowest reading CREA has on record.

A Look at Individual Markets

CREA noted that, “generally speaking, most markets east of Saskatchewan are seeing prices accelerate in line with strong sales numbers,” while B.C. and Alberta experienced more “modestly positive” price gains.

Here’s a look at where average prices stand in some of the country’s key markets:

• Ottawa: $506,700 (+18.4%)
• Halifax: $363,692 (+17.2%)
• Kingston, ON: $458,026 (+15.2%)
• Fredericton: $571,471 (+14.3%)
• Greater Montreal Area: $401,300 (+14.1%)
• Greater Toronto Area: $880,400 (+10%)
• Greater Vancouver Area: $1,031,400 (+4.5% year-over year)
• Victoria: $724,600 (+3.5%)
• Calgary: $411,200 (-1.4%)

Making Sense of This Housing Market

Earlier this year, before COVID changed the world, several of Canada’s largest housing markets were approaching “frothy” levels of activity not seen since 2016. In January, for example, the Greater Toronto Area recorded an 8.5%  increase in selling prices compared to the year before.

Much of that demand came from first-time buyers competing fiercely against one another for fear of missing out, or “FOMO.”

In July, GTA home prices soared 10% year-over-year to an average price of $800,400 for all property types.

Yet, homebuying intentions are stronger than ever. The percentage of renters who said they plan to purchase in the next 12 months more than doubled from 7% to 14%, according to recent data from Mortgage Professionals Canada. Likewise, 9% of current homeowners plan to purchase a new home within the next year, up from 7% in 2019.

“It can be hard to understand how the housing market can be so hot when the unemployment rate remains in double-digits,” wrote Brian DePratto of TD Economics.

One possible explanation, he says, is to look at the demographics most impacted by COVID-related job losses.

“The pandemic has disproportionately impacted lower-income Canadians, who are less likely to be or become homeowners,” DePratto said, adding that July employment among low-wage earners was 85.4% of pre-pandemic levels, compared with 97.4% for all other paid employees.

Secondly, government assistance programs to support those affected by COVID are likely keeping economic data stronger than it normally would be.

“A number of support programs, including mortgage forbearance, are helping insulate the economy from the worst impacts of the pandemic,” DePratto said. “As autumn approaches, these programs will expire or change form. Depending on the progress of the broader economic recovery, this could bring significant headwinds to housing markets, particularly prices.”

RECORD-SETTING CANADIAN HOUSING MARKET IN JULY

Canadian Housing Market Very Strong in July

Today’s release of July housing data by the Canadian Real Estate Association (CREA) showed a blockbuster July with both sales and new listings hitting their highest levels in 40 years of data. This continues the rebound in housing that began three months ago.

National home sales rose 26% month-over-month (m-o-m) in July, which translates to a 30.5% gain from a year ago (see chart below). July’s sales activity was the strongest for any month in history. According to Shaun Cathcart, CREA’s Senior Economist,  “A big part of what we’re seeing right now is the snapback in activity that would have otherwise happened earlier this year. Recall that before the lockdowns, we were heading into the tightest spring market in almost 20 years. Things may have gone quiet for a few months, but ultimately the market we’re seeing right now is mostly the same one we were heading into back in March. That said, there are some new factors at play as well. There are listings that will come to the market because of COVID-19, but many properties are also not being listed right now due to the virus, as evidenced by inventories that are currently at a 16-year low. Some purchases will no doubt be delayed, but the new-found importance of home, lack of a daily commute for many, a desire for more outdoor and personal space, room for a home office, etc. will certainly also spur activity that otherwise would not have happened in a non-COVID-19 world.”

For the third month in a row, transactions were up on a month-over-month basis across the country. Among Canada’s largest markets, sales rose by 49.5% in the Greater Toronto Area (GTA), 43.9% in Greater Vancouver, 39.1% in Montreal, 36.6% in the Fraser Valley, 31.8% in Hamilton-Burlington, 28.7% in Ottawa, 16.9% in London and St. Thomas, 15.7% in Calgary, 12.1% in Winnipeg, 9.7% in Edmonton and 5.4% in Quebec City.

COVID SUPERCHARGES CANADIAN HOUSING– YET CMHC STILL GLOOMY

Pandemic Triggers Red-Hot Summer Housing Market

We will get the full story on July housing in Canada when the Canadian Real Estate Association releases its July data in the next few days, but local real estate boards have reported a robust July market. Even in Calgary, year-over-year sales have jumped by double digits. Sales in Montreal were up more than 45% y-o-y, while Ottawa and the GTA were also very strong. Out west, Vancouver and other hot spots in BC saw the results of pent up activity, from both homebuyers and sellers, that had been accumulating over the past year.

Remember, had it not been for the pandemic, a record spring sales season was in the cards. The lockdown postponed that strength, with sales jumping sharply in May, June and July. Supply continues to remain limited relative to demand, and the Bank of Canada is looking towards housing as a leading sector in the recovery.

Record-low interest rates have boosted affordability everywhere. The Bank of Canada has made it clear that interest rates will remain low for an extended period. Mortgage rates have fallen, as have interest rates on home equity lines of credit. Even five of the Big Six banks have cut their advertised 5-year fixed mortgage rates (posted rates) by about 15 basis points to 4.79%.

These rates have been very sticky on the downside, as banks are reluctant to cut posted rates, which are is used to calculate the penalty for breaking a mortgage. Indeed, the gap between the posted rate and the 5-year government of Canada bond yield is historically wide. So is the gap between posted rates and actual contract mortgage rates at the very same banks.

The Bank of Canada posted rate is the qualifying rate for the mortgage stress test for insured and uninsured mortgages at the federally-regulated lenders–the so-called B-20 rule. That qualifying rate is set to fall from its current level of 4.94% to 4.79% later today when the central bank is due to update its figure. 

Last February, following months of pressure from the real estate industry, the Department of Finance and the federal banking regulator announced they would rejig the “floor” of stress tests that borrowers must pass to qualify for insured and uninsured home loans. Then came COVID-19, and a sweeping government rescue that included regulatory relief for lenders. As part of the response, the change to the stress test, which was planned for April, was suspended indefinitely.

Last month, the Office of the Superintendent of Financial Institutions announced it would “gradually restart” policy work in the fall. Still, it made no mention of resuming consultations on the change to its stress test for uninsured mortgages, a vital component of the regulator’s B-20 guideline. If the new rules had been implemented, it is estimated that the qualifying rate floor would be roughly 4.09% rather than the new rate of 4.79%.

Several factors, in addition to low interest rates, have contributed to the housing market surge. Having spent so many months working from home, many people are looking for more space. With a significant number of businesses announcing that telecommuting will be the new normal, at least most of the time, buyers are moving to more remote suburban locations where their dollars buy more space. This has been reflected in the slowdown in the condo market. This is not just a Canadian phenomenon but is evident in the US and parts of Europe as well.

Despite the surprising strength in homebuying during COVID, CMHC continues to blast warnings.

CMHC Wants To Expose The “Dark Economic Underbelly”

Yesterday, Evan Siddall, the CEO at the Canada Mortgage and Housing Corp, published an August 10 letter to the financial industry imploring lenders to “reconsider” offering mortgages to highly leveraged households, saying excessive borrowing will worsen the pain of the coming economic adjustment. Evan Siddall said the Crown corporation had lost market share due to restrictions it imposed on high-risk borrowers earlier this summer. Private mortgage insurers have picked up that business, weakening CMHC’s position and threatening the agency’s ability to protect the mortgage market in the event of a crisis, he said.

CMHC continues to project that house prices will fall later this year, and next, “once government income supports unwind, bankruptcies increase and unemployment starts to bite.” A highlighted sentence in the letter says, “We don’t think our national mortgage insurance regime should be used to help people buy homes with negative equity. But by offering 95 percent loan-to-value mortgages subject to a 4 percent capitalized insurance fee in the midst of an economic calamity, that’s what insurance providers are doing.” Siddall, who steps down from his position at the end of the year, goes on to say that we risk exposing too many people to foreclosure. 

CMHC announced in June it would narrow eligibility criteria to require higher credit scores and lower debt burdens to qualify for a mortgage. The move, which took effect on July 1, was intended to protect new home buyers from falling prices and reduce taxpayer risk to any market correction.

We have sustained a reduction in our market share to promote a more competitive marketplace for your benefit,” Siddall said in the letter. “However, we are approaching a level of minimum market share that we require to be able to protect the mortgage market in times of crisis. We require your support to prevent further erosion of our market presence.”

CMHC’s private-sector competitors, Genworth MI Canada Inc. and Canada Guaranty Mortgage Insurance Co., opted not to follow along with the rule changes and have increased their market share, as a result, said Siddall.

Siddall concluded with two requests for lenders: “We would hope you would reconsider highly leveraged household lending. Please put our country’s long-term outlook ahead of short-term profitability. Second, please don’t aggravate the impact by undermining CMHC’s market presence unnecessarily.”

CMHC’s ability to respond effectively in a crisis will be weakened if its market share deteriorates significantly further, he said. “If you want us in wartime, please support us in peacetime.”

–DR. SHERRY COOPER

Stress Test Rate to Fall to 4.79%

The stress test rate is about to fall for the second time in three months following cuts by Canada’s Big Six banks to their 5-year fixed posted rates.

Mortgage experts say the Bank of Canada will reduce the benchmark qualifying rate—a.k.a., “stress test rate”—from 4.94% to 4.79% this week.

National Bank of Canada cut its posted 5-year fixed rate by 15 bps on Monday, following similar cuts by BMO and CIBC over the weekend, while RBC and TD lowered their rates last week.

In May, similar big-bank posted rate reductions caused the qualifying rate to fall from its then-current level of 5.04%, since the rate is based on a mode average of the big banks’ 5-year fixed posted rate. That marked their first time since January 2018, when OSFI’s stress test was introduced, that the benchmark qualifying rate fell below 5%.

“It will make qualifying easier, or permit some people to borrow fractionally more,” Paul Taylor, President and CEO of Mortgage Professionals Canada, told the Globe & Mail.

Just how much more? Well, not a whole lot in the scheme of today’s average home prices.

Rob McLister, founder of RateSpy.com, calculated that a buyer earning $70,000 a year and purchasing with the minimum 5% down would be able to afford roughly $4,000 more home, or about 1.2%.

“That’s not much to get excited about, but on a market-wide basis, small buying power improvements are inflationary for home prices, other things equal,” he wrote.

At 4.79%, the benchmark qualifying rate will be just 15 bps above the all-time low of 4.64%, last seen in July 2017, McLister notes.

Stress Test Still Well Above Market Rates

Despite the reduction, the stress test rate is still roughly 290 basis points above the lowest nationally available insured rate today.

“At present, [the current formula] results in a big increment above actual contracted interest rates,” noted MPC chief economist Will Dunning in a previous report.

And that’s despite the current interest rates expectations, including Bank of Canada Governor Tiff Macklem’s suggestion there will be no interest rate hikes for the next two or even three years.

“Interest rates are very low and they are going to be there for a long time,” Macklem said.

A Better Formula Still on Hold

While these recent small reductions to the mortgage qualifying rate are assisting affordability to a small degree, industry leaders have called on the federal government to proceed with a plan to change how the stress test rate is calculated.

In April, the Department of Finance said homebuyers purchasing with an insured mortgage would be stress-tested at a rate equal to the weekly median 5-year-fixed insured mortgage rate plus 2%.

At the time, when the stress test rate was 5.19%, the change would have reduced it to 4.89%. But in March, at the height of the COVID-19 pandemic, the government announced it would suspend the proposed changes.

A similar change for the uninsured mortgage stress test, which was being considered by the Office of the Superintendent of Financial Institutions (OSFI), was also put on hold.

The pause on new regulatory changes was sensible “given the marketplace uncertainty in March,” Taylor said last month. “However, as we begin to open businesses again…now is the time for OSFI and Finance to consider implementation of the new test.”

–Steve Huebl

COVID-19 Stokes Canadian Homebuying Intentions: MPC Report

The global pandemic may have brought the Canadian real estate sector to a near standstill this spring, but over the longer term it appears to have stoked homebuying intentions.

Fourteen percent of current renters say they plan to purchase a home within the next 12 months, up from 7% reported in late 2019, according to new survey results released by Mortgage Professionals Canada. The percentage of renters who say they would never purchase a house has also fallen by more than half, from 32% at year-end 2019 to 14% post-COVID.

Among current homeowners, the results show 9% plan to buy within the next year, which is also up from 7% at year-end 2019.

Study author Will Dunning, Chief Economist at MPC, admitted to being surprised by the results showing increased homebuying expectations for the near future.

“It is possible that the evolving emergency has caused more non-owners to decide that they want to buy homes (for example, to move out of an apartment building, where social distancing is challenging, to a lower-density environment),” he noted, while adding historically low mortgage rates are also making homeownership more affordable.

Dunning did caution, however, that buying intentions don’t always fully translate into actual home purchases, for several reasons.

“Some people, when they research their options, may decide not to buy,” he said. “Or, they might discover that because of the mortgage stress tests, they would be unable to obtain the financing they would require.”

Reasons for Wanting to Buy a Home

The top reasons cited by renters for wanting to purchase a home include:

• 28%: “I want to live in a nicer home”
• 14%: “My home is no longer suitable”
• 14%: The current situation makes this a good time to get a deal”
• 12%: “Low interest rates make this a good time to buy”
• 11%: “I want to live somewhere less expensive”

For existing homeowners, their biggest motivator for wanting to purchase a new home is that their current home is no longer suitable (38%), whether due to size or location. Another 13% said they want to live in a nicer home, while 12% cite low interest rates.

The report further explored reasons why respondents said their current dwelling is not suitable, the majority of which are directly related to the lockdowns in place earlier in the year:

• “Spending more time at home means I need more space”
  • 31% for owners and 33% for non-owners
• “The space isn’t conducive to the inclusion of a dedicated work area and can’t be or isn’t easily modified”
  • 17% for owners, 24% for non-owners
• “When quarantined, the property doesn’t support my mental health or provide enough outdoor space”
  • 14% for owners, 17% for non-owners
• “I need to live somewhere where social distancing is easier”
  • 9% for owners, 7% for non-owners

Additional Mortgage Consumer Trends

Here are some of the other key findings from MPC’s report, Rapidly Evolving Expectations in the Housing Market:

• House price growth expectations
  • They’re the “smallest we’ve ever seen,” the report noted
• Canadians’ confidence in their ability to weather a downturn in the housing market
  • Unchanged from pre-pandemic results, at a score of 6.91 out of 10, with 10 representing strong agreement
• How Canadians view their homes
  • They predominantly see their homes as a place to live (75%), and to a lesser degree as an investment (25%)
• Is now is a relatively good time to buy?
  • There was a slight rise in the score among homeowners, but a more significant rise among non-owners, from a negative score of 5.23 at the end of 2019 to a positive score of 6.28 in this survey
• Interest rate expectations
  • Responses in previous surveys “always show an expectation of rising rates”
  • The latest response “might be the lowest ever recorded by this survey”
• COVID-19 impacts
  • 20% of homeowners reported impaired income due to COVID-19
  • 68% of first-time buyers and 75% of repeat buyers said they would have no difficulty making their mortgage payments
  • 1% of first-time buyers said they would only be able to make partial or infrequent payments (vs. 0% for repeat buyers)

“What we have seen clearly is that the vast majority of homeowners are not feeling a long-term financial impact related to COVID-19, and that potential homebuyers are still very much in the market for a home, signs of which are being seen in regions across the country,” said Paul Taylor, President and CEO of Mortgage Professionals Canada.

–Steve Huebl

Latest in Mortgage News: Toronto Home Prices Set July Record

The rebound for Toronto home prices continued in July, with the average selling price reaching a record $943,710.

That’s a 16.9% increase compared to a year earlier, according to the Toronto Regional Real Estate Board (TRREB). Home sales in the Greater Toronto Area were up 29.5% in July compared to a year earlier, and up 49.5% vs. June 2020.

“Normally we would see sales dip in July relative to June as more households take vacation, especially with children out of school,” said TRREB president Lisa Patel. “This year, however, was different with pent-up demand from the COVID-19-related lull in April and May being satisfied in the summer, as economic recovery takes firmer hold…”

TRREB noted that competition among buyers picked up during the month, which fuelled the acceleration in price growth.

In Vancouver, home prices rose 4.5% year-over-year to $1,031,400 as more buyers took to the market, encouraged by low interest rates, according to the Greater Vancouver Real Estate Board.

Home sales were up 28% compared to June, as COVID restrictions eased and more buyers took to the market.

“We’re seeing the results today of pent-up activity, from both homebuyers and sellers, that had been accumulating in our market throughout the year,” said Colette Gerber, chairwoman of the GVREAB.

10-Year Rates Reach Record Lows

There’s typically not too much demand for decade-long mortgages, but with rates falling as low as 2.59%, they’re starting to attract some attention.

Last week, Tangerine Financial unveiled a 2.59% 10-year fixed rate for purchases, transfers and refinances.

Compare that to the near 4.00% 10-year rates available just a year and a half ago.

Granted, there are now many other fixed-rate terms available for under 2.00%. But for those who may be in the home-stretch of paying off their mortgage or who value rate stability above all else, today’s 10-year rates are decent value.

GTA Condo Sales Plummet in Q2

New condo sales in the Greater Toronto Area (GTA) fell 85% in the second quarter of 2020 compared to the previous year, reports Urbanation Inc.

“Only six projects and 1,176 units were launched for pre-sale during the quarter, which compares to 40 projects and 11,415 units launched in Q2-2019,” the real estate consulting firm noted in its Condominium Market Survey.

On the other hand, Urbanation notes that average selling prices for units in actively marketed new condo projects in development across the GTA averaged a record-high $867 per square foot, edging up from $864 psf in Q1 2020 and rising 8% year-over-year, reflecting “broad-based increases in selling prices.”

“The GTA condo market showed resiliency in the second quarter, albeit with much lower-than-normal activity,” noted Shaun Hildebrand, President of Urbanation. “More telling will be the second half of 2020, which will see supply pick up from growth in new launches and the nearly 14,000 units that are scheduled for completion in the next six months.”

What You Need to Know About Spousal Buyout

Separation or divorce aren’t things people ever plan for. But the end of a relationship can have a significant impact on planning surrounding your residence—most often your largest asset.

But the end of a relationship doesn’t necessarily mean you’ll be forced to sell your home, notes April Dunn of Red Door Mortgage Group.

“There are mortgage products available that can allow you to buy out the other party while enabling you to stay in your home,” she wrote, adding lenders will require a finalized separation or divorce agreement.

“The mortgage funds can only be used to buyout the other party’s equity in the home unless it is clearly laid out in the separation agreement that some joint debts need to be paid out to a maximum of 95% of the value of the property,” she adds.

Dunn recommends anyone interested in exploring this topic further contact a mortgage broker who will be able to guide them through the process and available options.