I give a lot of respect for the professionals who are trying to assist with separation and divorce cases. We never know who is going to walk into our door, we don’t know if one of the parties will cause delays and/or sometimes things get emotional for everyone. Imagine parenting plans, add CAS, a dash of constant bickering, a dose of unprofessional counterparts and a pinch of financial chaos and of course you need to do your job and represent your client to the best of your ability to find the best resolution.
I was reviewing a few cases with my team this morning and we thought it would be a great idea to discuss a specific file and a common situation we see.
Joe and Alyson (not their real names) were in the process of a separation. They decided to explore various options and interview lawyers/mediators/those who participate in Collaborative Practice. They finally made the best decision for the 2 of them and started on their journey to separation.
Joe had an above average understanding of finance but decided to follow recommendations from various professionals. One of the professionals assisting ‘made a call’, had their mortgage penalty removed and Joe could solely take over ownership of the house and mortgage amount.
Joe was thrilled!
One night, Joe was telling his friends about his new found wealth. He saved over $8,000; everyone was excited for Joe. But, one of Joe’s friends (a client of mine) asked Joe if he knew what the terms and conditions of this new mortgage were or if he knew what his future mortgage penalty would be? Joe’s friend strongly suggested that he read the fine print and call my office to review the document to make sure he was in fact in a better position.
Was Joe really saving his mortgage penalty?
Monday morning, Joe called my office. He sent us the terms and conditions of his mortgage that was scheduled to fund later that week. Below is what we found:
Joe’s terms and conditions; none of which was apparently disclosed to him:
- Joe would need to repay the mortgage penalty savings if he broke his mortgage within 5 years
- Joe would also incur a mortgage penalty above and beyond the $8,000 savings noted earlier
- Joe could not port his mortgage to another property
- Joe’s mortgage penalty would be in the $15,000 – $18,000 range if he broke the mortgage
- Joe was handcuffed to the bank, his house and to the mortgage
What we learned:
During the separation process, we all want the very best for our clients. Plus, who wouldn’t want to save $8,000 – the ‘make the call’ gesture was made in the best intentions for the client. However, we know what we don’t know; the terms of the conditions would have crippled Joe if and when (statistically when) he breaks his mortgage down the road. Joe would be solely responsible for a lump sum about in the range of $23,000 – $26,000 if he did not complete the term of his mortgage.
Joe and Alyson decided to split the penalty ($4,000 each) and allow Joe to enter into a mortgage where he had more control and favourable terms.
What Joe received
- Portability – Joe can take his mortgage with him to the next property if he moves
- Joe’s penalty would be the lowest possible if he would break his mortgage
- Joe’s cash flow increased by $1,300 per month
- Joe was able to afford other luxuries such as RRPS, RESPs and other investments with his increased cash flow
- Joe was in control of his mortgage
There is no doubt in my mind that family law professionals care deeply about their clients and their wellbeing. It is important that lawyers, neutrals, and other professionals that are involved in the separation process rely on and allow separation mortgage experts to inform clients about their options, penalties, and affordability. It does sound counterintuitive, but an $8,000 savings would have cost Joe 3 times the amount down the road.