WIDOWED? Your mortgage could be in jeopardy!

Friday May 31st, 2019

Share

  Legally, a widow or widower is required to notify the bank that holds their home’s mortgage, that one of the mortgagees has passed away.  If the bank isn’t notified right away, it will soon become evident when your mortgage is up for renewal, whether two years from now or five years from now.   A simple signature was sufficient in the past, to renew the same mortgage for a further term, but when one signature is missing, what happens?

Here’s the good news:  If the mortgage isn’t changed in any way – for example, increasing the amount of the mortgage, the amortization, or changing the type of mortgage – one signature may be sufficient for the status quo to continue without having to re-qualify for the mortgage.   Of course, the mortgage must have been in good standing in the past.

The moment ANY change is made, the living spouse has to re-qualify for the mortgage on their own.  It doesn’t matter how good your credit is or how much equity you have in the property, it doesn’t matter that you’ve never missed a payment or don’t see any issue continuing the payments;  all that matters in the end, is can your income carry your mortgage and other debts on its own, applying current ratios?   A home that was financed with two people, suddenly has to jump through all of today’s financing hurdles with one?  This can be quite a rude awakening.

Many surviving spouses suddenly feel they could be in jeopardy of losing a home they’ve lived in their whole lives.   My best advice – and this comes from experience – don’t poke the bear.   Leave the mortgage as it is until you feel your income can fully support a new mortgage application on your own.  An independent mortgage broker can help you calculate your ability to do so, without raising any red flags at your mortgage institution. 

Of course all of these factors also apply with a secured line of credit, since it is secured on your property. 

It is critical to think ahead, to make sure that your Notice of Assessments for two years are going to show an income that will satisfy your mortgagor when renewal time is approaching.   In some situations, if you are self-employed, it may not be the best time to “write-off” as much as you can!   I had to bite the bullet and limit my amount of business write-off’s to make things come together.  

 


Post a comment