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21 May

Divorce: Your Home and Mortgage


Posted by: Sarah Boudreau

Divorce can be a very difficult time, and the changes to the mortgage rules over the last few years have made it even more difficult.

Most often, we see that one spouse will want to remain in the home and will need to buy the other out of the remaining equity.

In an amicable and/or settled situation, a Marital home buyout can traditionally be done one of two ways:

#1. Standard Refinance.

This can be a great solution; however, a standard refinance is limited to 80% of the value of the home. This leaves 20% of the equity inaccessible without a sale. The spouse that intends to keep the property will need to qualify for the mortgage and any other liabilities on their own.

#2. Insured Marital Home Buyout.

This works as a type of refinance, but is structured as a purchase, wherein one spouse purchases the home from the other. In the event there is less than 20% equity in these mortgages can be insured through CMHC, Genworth or Canada Guarantee (subject to regular insurance premiums or premium top-ups) and they can be done up to 95% of the value of the property, as per insurer guidelines and subject to sliding scale on properties valued over $500,000. Each insurer has slightly different program requirements, so depending on the needs of the client, we will match them accordingly. For example, CMHC will allow the equity in the home to be used only to cover the exact payout to the ex-spouse. Genworth and CG will allow funds advanced to include other marital debts to be paid out, provided they are specified in the separation agreement.

Documentation Requirements for Both of These Options:

At the time of mortgage approval, in addition to income verification and other standard conditions, lenders will require the following:

  • Divorce/Separation Agreement. Lenders will not finalize a mortgage approval until there is a legal agreement in place outlining the split of assets. This protects both the lender and the client as a soon to be ex-spouse could make a claim against any assets in your name.
  • Proof of Support Payments. If there are child or spousal support payments and these are needed as income for the buyer to qualify, further documentation will be required. The payment amounts should be specified in the Separation/Divorce Agreement and lenders will require a minimum of 3 months’ worth of bank statements showing the support payments are being made/received consistently on the same day each month and for the same amount.
  • An Offer to Purchase between the two spouses for the subject property (in the case of spousal buyout)
  • An Appraisal will be required in the case of a spousal buyout. As this transaction is not an Arm’s Length Transaction the lender or insurer will order an appraisal to be completed on the property to confirm market value.

We now have a 3rd option, as we know many clients need access to their equity in order to fund their legal fees and cost of living BEFORE the separation details are agreed upon. The separation process can be lengthy, painful, and expensive. Often funds for day to day living expenses, monthly debt liabilities, and legal fees are tied up in the process. We have access to private lenders that understand the complexities of the separation process. If your client needs access to funds, even if a Lis Pendens has been issued, we can help.


If you think that I may be able to help you and your client, feel free to call or email me any time for more details.