Maybe it is a coincidence or maybe it is a larger trend. I am finding that more people do not get a separation agreement after a marriage (or co-habitation) breaks up. In many cases this can prevent the clients from getting an "A" mortgage, or a best-rate mortgage
Like most things I talk about, the consequence of not having a separation agreement depends upon the circumstances.
Anybody who is recently separated should use all legal means necessary to get a legal separation agreement. I have a few would-be clients who are having a tough time getting their ex-spouse to sign. A mortgage application is stalled until that issue is resolved (a private mortgage loan is likely possible).
The reason that a separation agreement is important is that no lender wants to approve a mortgage and then find there are financial surprises afterward. The borrower may be subject to a different division of assets than originally reported or may be subject to monthly payments to the ex-spouse.
I have handled cases where the couple have been long separated (20 years or so) and don't have a separation agreement. We were able to work past that. However, if the separation is recent, then it is critical that the borrower get an agreement.
Thanks Christina for the great advice!
Christina Horvath, MSc
Verico Paragon Mortgages Inc.