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Old 03-09-2012, 02:02 AM
Canada Gold 2010 Canada Gold 2010 is offline
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Default Calculating Buy Out Amount & Refinancing 101

I'm terrible at math. I think I got the basics of how to arrive at the net equity that is in the matrimonial home, however, it's the refinancing that's causing smoke to come out of my ears!

I'm really hoping there is someone here, part of the collective, that can walk me through refinancing 101.

Here are the particulars:
  • The husband wishes to buy the wife out the matrimonial home by remortgaging
  • Home appraised at $450,000
  • Outstanding mortgage remaining: $250,000
  • Mortgage Penalty: $10,000
  • Down payment gift that husband received from parents: $20,000 (note:wife is allowing husband to retain this in exchange for another asset worth $20,000)
  • Wife's matrimonial debt at date of separation: $10,000 in CC
  • Husband's matrimonial debt at date of separation: $4,000 in CC
  • Would like to eliminate matrimonial debt upon refinancing
OK, when I try to arrive at the wife's buy out amount, I calculate the following:

$450,000 (Value of Home)
-$250,000 (outstanding mortgage)
-$10,000 (mortgage penalty)
-$20,000 (down payment gift that is staying with husband)
-$10,000 (wife's credit card)
-$4,000 (husband's credit card)
=$156,000 Total Net Equity

=$156,000/2=$78,000=Wife's Share

What am I missing here? I know there's something.

Note: The credit card debt is from the date of separation, which is over 2 years ago. The husband has paid off the husband's CC debt since then. Should it be taken out, or left in? These are the amounts that the husband and wife agree as being "matrimonial debt" at the separation date.

How does one go on to then calculate what the remortgaged amount would be?

$250,000 (outstanding mortgage on matrimonial home)
+$78,000 (wife's buy out amount)
+ ???????? (this is where the smoke comes out of ears and I curl into the fetal position)

If the wife's $10,000 is being wiped out, does this $10,000 get rolled into the remortgaged amount?

How is it recognized that the wife is responsible for half of the husband's credit card debt, just as the husband is responsible for half of the wife's credit card debt?

Also, the mortgage penalty; the husband will have to pay this, too, with the re-mortgaging. The husband and wife should split this, but how do you get the numbers to work, to reflect that the husband and wife are each resposible for half of the penalty?

Old 03-09-2012, 02:28 AM
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Have you looked at this post, CG?
Old 03-09-2012, 02:47 AM
beebie beebie is offline
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I think you need to open an Excel spread sheet with three columns.
Column 1 will list Assets and farther down Liabilities.
Column Two will be Husband.
Column Three will be Wife.
You list the assets in Col 1 being the $450,000 house in the Husband column if it is going to be your asset.
Wife has no assets.
Parties have no bank accounts, vehicles, pensions??? Whatever.
You total the assets for Husband and Wife.
Husband : 450000, Wife: 0
Total Family Assets: $450,000.00

Under Column 1: Liabilities , you list:
Husband Column : you put the $250,000 mortgage, and under that the $10,000 mortgage penalty and then under that the 20 ,000 exemption and the 4,000 CC debt for a total of $284,000 in liabilities for him.
Wife Column: list the $10,000 CC debt for a total of $10,000 liabilities for her.
Total family liabilities is : $294,000.00

Subtracting total family liabilites from total family assets = $156,000.00 which should be shared so each party should have $78,000.00.

Right now the Husband has $166,000 in assets after selling the house and paying all the debt.

The Wife has -10,000.00 in assets because she paid her credit card.

He has to give her: $88,000.00

Go into CanLii and search "net family property statement" or something like that and you might find some examples.

I hope this is right and if not, somebody better at accounting, can help you.
Old 03-09-2012, 07:36 AM
standing on the sidelines standing on the sidelines is offline
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if your ex stays with the same bank for the mortgage they may not charge the penalty. Check with the bank on this one. If you can save 10 grand why not.
Old 03-09-2012, 10:30 AM
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Rioe Rioe is offline
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Why are you trying to handle the marital home this way? I think you're making it more complicated than it needs to be.

Just add up ALL your assets, and ALL your debts, depending on how you are dividing things up, and see what the equalization payment would be. If you're ending up with the bigger asset, the house, then it's very likely you'll be paying her.

As mentioned, you want a spreadsheet, and put things in the columns based on who they will end up with. Some things may end up in both columns:

item ------------------- yours ----------------ex’s

house ____________ 450,000
mortgage _________ -250,000
cars _____________ $ _______________ $
Car loans _________ -$_____________ -$
Joint account ______ Half $ _________ Half $
pensions __________ $ ______________$
RRSPs _____________ $ ______________$
Credit card debt ____-4,000 __________-10,000
Household stuff ____ $ ______________ $

These are all as of date of separation. Hopefully you closed down everything joint on or around that date and didn't go paying somebody else's expenses.

Depending on what your other assets are (pensions, etc) and who is ending up with what, the equalization could be quite different from just the house "buyout."

Add up each column. Divide the difference in half. Say you end up with $200,000 in your column and she ends up with $80,000. The difference is $120,000 so you'll owe her $60,000 to make things equal. Depending on how you do the equalization (you might opt to divide some of your pension off to her, for example, or she might just get more 'stuff' from the house or more of the RRSPs) you might not need to get a higher mortgage.

Two things I haven't addressed in my example above.

First, she's "letting" you keep the 20,000 down payment gift from your parents in exchange for another asset? That's ridiculous and I hope you aren't falling for it. That $20,000 went into the house a long long time ago, and gets divided. The matrimonial home rules are funny that way. And if she's getting another big asset, it's not generosity, is it? It's just division. So include the asset she's keeping in her column, and the parental gift will take care of itself in the calculation. Don't include it a second time - it's already in the house value.

Second, what's with the mortgage penalty? Talk to your bank. If you can carry the existing mortgage on your own, they'll just take her name off it (it's called releasing her from the mortgage) once the house title is changed. If you have to take out an ordinary loan or line of credit to pay the equalization, at least that won't have as steep a fee.

Rereading this, I don't know if I've helped or created more confusion. Sorry.

Last edited by Rioe; 03-09-2012 at 10:37 AM. Reason: ugh, all my columns jammed up together!
Old 03-09-2012, 01:05 PM
Mess Mess is offline
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I'm good at math and I agree with Rioe.
Old 03-10-2012, 12:57 PM
Canada Gold 2010 Canada Gold 2010 is offline
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Thanks for the responses everyone!

Why are we trying to handle the marital home this way? Hmmm, good question. This was how the STBX and her lawyer wrote up the proposed SA. They had the down payment, and both our CC debt against the house. When my lawyer reviewed it, nothing concerning caught his eye. We just went with it, I guess. We just added the mortgage penalty as the bank is quite adamant that there will be a penalty once the mortgage is broken.

RRSPs were splitting right down the middle; we're transferring half the difference between the two RRSP accounts, so that they are equalized.

There is no other debt. However, I'm being advised that because she left the marital home over a year ago, and because she is on title and the mortgage, she "should" be contributing to the mortgage, taxes, insurance and utilities until the house is resolved. I'm maintaining those obligations for the time being. I'm familiar with the concept of occupational rent, and would surmise that because I'm maintaining her share, it would wash away any claim for occupational rent.

Familiar with the concept of occupational rent, but I don't have a firm understanding of under what circumstances it becomes valid upon separation. Does it apply when there is a joint bank account, between the spouses, that is still being used to maintain the marital home? Or, when a spouse moves out, but is still contributing financially to the marital home through their own bank account? Does it still apply when the spouse that is residing in the marital home is fulfilling all the monthly financial obligations towards it with their own bank account?

Canada Gold 2010

Last edited by Canada Gold 2010; 03-10-2012 at 01:01 PM. Reason: spelling
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