Halifax Chronicle Herald
By: JOEY FITZPATRICK / Personal Finance

People enter into marriage with boundless optimism, but the harsh reality is that something like half of wedded unions will end in divorce.

Aside from the emotional considerations, people find themselves in uncharted territory in the personal finance arena in the aftermath of a marriage breakdown.

One common area of dispute is the matrimonial home. Often the parties will each get an appraisal of the property, with very different results. The party who is going to retain the home and buy out the other's equity obviously would prefer a lower appraisal, and vice versa.

Sometimes it simply can't be resolved, says Audrey Wamboldt, regional sales manager with Invis, Canada's largest independent mortgage broker.

I have one situation where we've been through four appraisals, and it looks like the courts will have to decide it.

After any property settlement, whether the plan is to buy out the other spouse's equity or search for a new home, the newly divorced or separated individuals must qualify for a new or refinanced mortgage with their own income.

Most lenders will not allow alimony and support payments to be considered as income, unless you're borrowing less than 75 per cent of the home's value, Wamboldt says. They want more security in terms of income.

In fact, it wasn't until the 1980s that a wife's income was even allowed to be used when qualifying for a mortgage.

Prior to that, women's income didn't count. We could go off and get pregnant, so lenders didn't think there was job security there.

If you're the person who will retain the home, you want to make sure you can carry the mortgage before making that commitment. A mortgage pre-approval will indicate clearly how much of a home you can afford.

Most lenders also require a separation agreement before proceeding with a mortgage.

A separation or divorce can mean many added expenses, such as legal bills, and you will want to find ways to manage those expenses, as well as personal debt. If both spouses were working,then obviously the income level will not be the same when you divorce.

Getting a new mortgage can be an opportunity to access equity in one's home or consolidate credit card debt.

Accessing your credit report after a divorce can sometimes be a surprise to one party or the other, Wamboldt adds. Balances owing can be much higher than previously thought, or there may have been inquiries done by one spouse looking to gain additional credit.

Usually it's the spouse that has been left that gets the nasty surprise, she says. Quite often the other spouse has been making plans ahead of time.

Every time an inquiry is run through the credit bureau, it costs you points on your overall rating. It's always been considered a bad thing to be a credit seeker - going outside the institution where your father and grandfather banked to get credit.

Every time an inquiry is pulled on you, it's considered that you had to shop.

Equifax says that within a two-week period, if you're shopping for the same type of product at the same institutions, it will only count as one hit.

But if you're going from a chartered bank to a finance company to an electronic lender, they're not considered the same type of lenders, so that can really affect your credit rating.

After a separation or divorce, it's important for an individual to establish credit independently of their spouse, Wamboldt says, especially if one lacks a credit history.

Your spouse is the person you trust most in the world, but it's also the person who can hurt you.

Joey Fitzpatrick is a Halifax-based writer.

For Public Relations needs:
Steven Moyes, Corporate Communications
604-879-0228

For media comments and inquiries, please contact:

Steven Moyes
604-879-0228
E: Steven Moyes