Divorce is emotionally challenging—and the mortgage adds significant financial complexity. Understanding your options helps you make sound decisions during a difficult time. Here's a comprehensive guide to handling your mortgage during separation.
The Three Main Options
Option 1: Sell the Property
Process:
- List and sell the home
- Pay off mortgage from proceeds
- Split remaining equity per agreement/law
Pros:
- Clean break from shared debt
- Both parties freed from mortgage obligation
- Cash for fresh starts
Cons:
- Market timing may not be ideal
- Selling costs (5-6% of sale price)
- Must agree on sale price and process
- Finding new housing simultaneously
Option 2: One Partner Buys Out the Other
Process:
- Agree on property value
- Staying partner refinances into sole name
- Pays departing partner their equity share
- Departing partner signs off title
Pros:
- Stability (especially with children)
- One party keeps home
- No selling costs
Cons:
- Staying partner must qualify solo
- May need to qualify at higher amounts
- Departing partner's equity tied up until refinance
Option 3: Continue Joint Ownership (Rare)
Sometimes used when:
- Children's stability prioritized
- Market conditions unfavorable
- Neither can afford buyout
Risks:
- Ongoing financial ties
- Must agree on maintenance, payments
- Limits both parties' future borrowing
- Can delay moving on
The Buyout Process in Detail
Step 1: Agree on Property Value
Options:
- Professional appraisal (recommended)
- Comparative market analysis from realtor
- Agreed value (if both parties comfortable)
Step 2: Calculate Equity Split
Basic formula:
Fair Market Value - Outstanding Mortgage = Equity
Equity ÷ 2 = Each Partner's Share (unless otherwise agreed)
Example:
Explore Your Options
Schedule a confidential consultation about your divorce-related mortgage options.
Get Started- Home value: $800,000
- Mortgage balance: $400,000
- Total equity: $400,000
- Each partner's share: $200,000
Step 3: Staying Partner Applies to Refinance
Must qualify for:
- Remaining mortgage balance PLUS
- Buyout payment to departing partner
In our example: Qualify for ~$600,000 ($400K existing + $200K buyout)
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Schedule a confidential consultation to discuss your divorce-related mortgage options.
Qualifying Solo: The Challenge
Income Requirements
You must now qualify on single income:
Requirements for 95% LTV:
- Legal separation agreement
- Matrimonial context confirmed
- CMHC insured
- Meeting standard qualification
Protecting Your Credit During Divorce
Joint Mortgage Risks
Until mortgage is refinanced or sold:
- Both parties remain 100% responsible
- Late payments affect both credit scores
- Default affects both parties
Protection Strategies
- Written agreement on who pays what during separation
- Automatic payments to ensure nothing is missed
- Regular monitoring of payment status
- Joint account for shared expenses (if feasible)
- Timeline for resolution (sale or buyout)
FAQ
Q: Can I remove my ex from the mortgage without refinancing?
A: No—lenders won't release a borrower without full refinancing. Both parties remain responsible until the mortgage is paid off or replaced.
Q: What if neither of us can afford the buyout?
A: Selling is likely the only option. The equity can be split, and both parties can start fresh. Sometimes one party agrees to accept less equity to avoid selling.
Q: What if my ex stops paying their share?
A: You're still responsible for the full mortgage. Document everything and consult your family lawyer. Non-payment can be addressed in separation proceedings.
Q: How long does the buyout process take?
A: Typically 4-8 weeks from application to closing. Add time for agreement negotiations before that.
Q: What if the home is underwater (owe more than it's worth)?
A: You can't do a standard buyout. Options include: selling at a loss (both contribute), short sale negotiation, or one party assumes mortgage with lender approval.
What's Next
Divorce-related mortgage decisions are complex and emotional. Talk to our team confidentially—we've helped many people navigate these situations with sensitivity and expertise.
Confidential Guidance
We've helped many people navigate divorce-related mortgage decisions. Talk to us about your options.
