Spousal Buyout Mortgages: How to Keep Your Home After Separation or Divorce
Going through a separation or divorce is emotionally and financially challenging. One of the biggest decisions couples face is what to do with the shared home. If one spouse wants to stay in the home, a spousal buyout mortgage can offer a practical solution.
This mortgage option allows one spouse to buy out the other’s share of the home, taking full ownership. It can be a powerful way to maintain stability—especially when children are involved or when staying in the home is a top priority.
In this guide, I’ll break down what a spousal buyout mortgage is, how it works in Canada, and what you need to consider before moving forward.
What Is a Spousal Buyout Mortgage?
A spousal buyout mortgage is a specialized type of mortgage used during a divorce or separation. It allows one spouse to refinance the existing mortgage and access enough equity to buy out the other spouse’s share of the property.
This type of mortgage is available through various lenders in Canada and is commonly used in situations where:
One spouse wants to keep the family home
The home is jointly owned
Both parties agree on the property division terms
How Does a Spousal Buyout Mortgage Work?
Let’s walk through the steps:
1. Determine the Home’s Value
First, an appraisal is needed to assess the current market value of the home. This is critical to calculating how much equity is available and what the buyout amount will be.
2. Calculate the Equity & Buyout Amount
Pay off the $300,000 mortgage
Pay the $150,000 buyout
3. Qualify for a New Mortgage
The spouse staying in the home must qualify for the new mortgage on their own. This includes meeting criteria for:
Income
Credit score
Debt-to-income ratio
Tip: If the home is located in a major metro area like Calgary or Vancouver, new zoning rules allowing rental suites may help you qualify by using rental income.
4. Complete the Buyout & Refinance
Once approved, the new mortgage is funded. The old mortgage is paid off, and the buyout amount is transferred to the departing spouse. The remaining spouse becomes the sole homeowner and takes full responsibility for the new mortgage.
Benefits of a Spousal Buyout Mortgage
Keep the Family Home: Avoid the stress of moving and give children stability in familiar surroundings.
Simplify Asset Division: A spousal buyout mortgage streamlines property division, especially when the home is the biggest shared asset.
Avoid Selling in a Down Market: You won’t be forced to sell at a time when home prices are low.
Maintain Emotional Roots: Staying in your home may offer comfort and continuity during a difficult life transition.
Important Considerations
💰 Can You Afford It?
Before moving forward, be honest about your monthly budget. Can you handle the mortgage payments, property taxes, and maintenance costs alone?
🧑⚖️ Legal Advice Is Essential
Always work with a divorce lawyer or family law professional to ensure the buyout agreement is fair, binding, and includes all necessary legal documentation.
💔 Emotional Wellbeing
While staying in the home can offer comfort, for some it may be emotionally triggering. Reflect on whether remaining in the home is what’s best for your long-term healing and peace of mind.
Spousal Buyout Mortgages in Canada: Who Can Help?
As a licensed mortgage broker in BC, I’ve helped many clients navigate complex financial situations during separations. Whether you’re considering a spousal buyout mortgage, need help calculating affordability, or want to explore other options like downsizing or buying out with the help of a co-signer, I’m here to guide you.
Let’s Talk About Your Mortgage Options
You don’t have to navigate this alone. If you’re going through a divorce or separation and need help understanding your mortgage options, reach out today. Book a call