Mortgage Options During Divorce or Separation

Divorce or separation adds complexity to your mortgage situation. Understanding your options—buyouts, refinancing, selling—helps you make decisions during an already stressful time.

Your Main Options

When a relationship ends with a mortgage involved:

1. Buyout – One spouse keeps the home, buys out the other
2. Sell – Sell the property and split equity
3. Keep Jointly – Maintain joint ownership (usually temporary)

The Spousal Buyout

This is the most common approach when one spouse wants to stay:

How it works:

• Staying spouse refinances to access equity
• Uses equity to pay departing spouse their share
• Mortgage transfers to single name

Example:

• Home value: $800,000
• Mortgage balance: $400,000
• Equity: $400,000 (each spouse entitled to $200,000)
• New mortgage: $600,000 ($400,000 existing + $200,000 buyout)

Qualification Changes

Major consideration: qualifying on a single income.

• The staying spouse must qualify alone
• Stress test still applies
• Child support received can count as income
• Child support paid counts as a debt

Navigating Separation? Let's Talk

Get confidential guidance on your mortgage options during separation or divorce.

Higher LTV for Marital Breakdowns

Special rule: buyouts during separation can go up to 95% LTV (vs. normal 80% max for refinancing).

Requirements:

• Legal separation agreement
• Property must be marital home
• CMHC insurance required

This exception helps spouses stay in the home when equity is tight.

Selling the Home

Sometimes selling makes more sense:

When to consider selling:

• Neither spouse can qualify alone
• Need fresh starts
• Equity is minimal
• Home is underwater (worth less than owed)
• Cooperation between spouses is difficult

Timing Considerations

Don't rush major decisions:

• Wait for legal agreement before making changes
• Consult your lawyer before refinancing
• Understand tax implications of any option

Mortgage timing:

• Can't typically remove a spouse without refinancing
• Separation agreement is usually required
• Process takes 30-60 days once started

FAQ

Q: Can I be removed from the mortgage without refinancing?
A: Very rarely. Most lenders require a new mortgage application to remove someone.

Q: What if my spouse won't cooperate?
A: Court orders can compel cooperation. Work with your lawyer.

Q: Do I need a separation agreement first?
A: Usually yes. Lenders want to see the legal framework before processing a buyout.

Q: Can I qualify using spousal support I'll receive?
A: Yes, but you'll need the separation agreement showing the amount and duration.

What's Next

Discuss your situation confidentially with our team. We handle buyouts and separation mortgages regularly and can guide you through the process.