Mortgages and Divorce – What are your options?

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Navigating Mortgages in Separation or Divorce: What You Need to Know

Are you currently going through a separation or divorce, or perhaps contemplating one? You’re not alone.

The unfortunate reality is that the COVID-19 pandemic has led to a surge in relationship breakdowns, with couples parting ways in unprecedented numbers.

While some couples thrived with the extra time together, for others, it became a catalyst for separation.

Since the pandemic began in March 2020, there has been a significant increase in the dissolution of relationships.

Matrimonial Home

One crucial aspect to consider when going through a separation or divorce is the fate of your mortgage, particularly if it involves your matrimonial home.

In this article, we will explore various options regarding the mortgage on the matrimonial home during a divorce.

(Note: Please bear in mind that family law is complex, and it is essential to consult with a knowledgeable family lawyer before taking any action.)

Exploring Mortgage Options in a Divorce in Canada:

When a couple purchases a property together and obtains a joint mortgage, both spouses typically become co-owners and co-borrowers. However, in the event of a divorce or separation, one spouse may wish to retain ownership of the home and take full responsibility for the mortgage.

Mortgage Spousal Buyout

A mortgage spousal buyout refers to a financial arrangement in which one spouse buys out the other’s interest in a jointly owned property during or after a divorce or separation.

It is a common scenario when couples decide to divide their assets, including the family home, as part of their legal separation process.

The mortgage spousal buyout process involves several steps:

1 – Property Valuation

The first step is to determine the fair market value of the property. This can be done through a professional appraisal or by seeking real estate agents’ opinions.

2 – Equity Calculation

The equity in the home is the difference between the property’s value and the outstanding mortgage balance. The spouse who wishes to buy out the other will need to determine the current equity amount.

3 – Negotiation

The spouses must negotiate the terms of the buyout, including the amount to be paid by the buying spouse to the selling spouse. The buying spouse may need to secure financing to cover the buyout amount.

4 – Mortgage Refinancing

To complete the buyout, the buying spouse will typically need to refinance the existing mortgage in their name only. This process involves applying for a new mortgage based on their income and creditworthiness.

5 – Legal Documentation

Once the terms are agreed upon, legal documents are prepared to transfer the ownership from the selling spouse to the buying spouse.

6 – Settlement

The buying spouse pays the agreed-upon buyout amount to the selling spouse, using the funds obtained through the mortgage refinancing.

It’s important to note that the mortgage spousal buyout process can vary depending on jurisdiction, the couple’s specific circumstances, and the terms outlined in the divorce or separation agreement. It’s advisable to consult with an attorney or financial professional experienced in family law to navigate this process effectively and ensure compliance with legal requirements.

cartoon of couple image of break up heart ripped in two

Selling the Home

If neither spouse wishes to keep the property or it is financially impractical to do so, selling the home and dividing the proceeds may be the most suitable choice.

In this scenario, the mortgage would be paid off using the funds from the sale.

Important Considerations:

It is vital to recognize that each of these options carries legal and financial implications. Therefore, it is highly recommended that both spouses seek independent legal and financial advice before making any decisions.

Conclusions and Further Thoughts

Separation or divorce is a difficult process, and it is crucial to approach it with careful consideration.

When it comes to mortgages and the matrimonial home, the choices available to you may have far-reaching consequences. Understanding your options, seeking professional advice, and weighing the potential legal and financial implications are essential steps toward making informed decisions.

Remember, every situation is unique, and what works for one couple may not work for another.

By being well-informed and seeking guidance, you can navigate this challenging time and lay the groundwork for a secure future.



PS – One of my hobbies is blogging about mortgages, debt and government policy.  During the day I’m a MORTGAGE BROKER in Kelowna, BC!

Check out the Huber Mortgage Home Buyers Guide HERE

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