Navigating a separation/divorce

Hi all,

Unfortunately my wife and I are separating and I'm trying to navigate this period carefully. Aside from the emotional and mental weight of it all, this will obviously be a major financial setback. However, we both have considerable equity in the house, savings, and defined benefit pensions, meaning that we have a strong capacity to start over and should be ok long-term.

I would be grateful for this community's insights on two issues in particular:

1. Equity buyout: I've been running the numbers and am looking at options to buyout my wife's equity in the family home. At a fair valuation, current interest rates (currently around 3.9% in Canada), and a 30-year amortization, I could afford the monthly payments of a refinance, albeit while pushing my PITI ratios to 27.6% of gross and 44.9% of gross. I receive regular and predictable 3% annual raises, meaning that these ratios will decline towards 25% in the next three years. What is your impression this plan?
2. Extra borrowing as part of refinance: I was wondering if I should borrow slightly extra as part of the refinance to have a cash buffer at a low interest rate that might reduce near-term financial stress. This could be used to finance part of value-adding home upgrades or unanticipated emergencies (see below).
3. New vehicle: I am navigating this with a 2009 Honda Accord with more than 300,000 kilometers. In the last year I have had it towed on 4 different occasions and had to replace the alternator, front ball joints, and serpentine belt assembly. It is just reaching the point of needing to be replaced and I live in an area that requires reliable private transportation. Given my other leverage ratios following the buyout, the only way I could afford a replacement vehicle (I'm thinking a 5 year old RAV4 at a cost of $30,000) would be to break the 20/3/8 rule and amortize it over a much longer period. Is this just wishful thinking?

I'm hoping that this increase in leverage is transitional as I maintain our house (safe neighbourhood, great schools, stability for kids) and in 3-5 years the cash flow pressures with me much lighter.

Thanks for letting know your views!