When a relationship ends, the house is usually the largest thing to sort out and the hardest to divide. It is also the part where people are most likely to get poor information, because the general advice, sell it or refinance it, misses a program built specifically for this situation.

This is a practical note on the mortgage side. It is not legal advice, and family law questions belong with a family lawyer.

The problem with an ordinary refinance

Say one partner wants to keep the home and buy out the other’s share.

A standard refinance lets you borrow up to eighty percent of the home’s value. If the existing mortgage is already a decent portion of that, there is often not enough room left to pay out the other partner. Plenty of people conclude at this point that they have to sell.

Frequently they do not.

The spousal buyout program

All three Canadian default insurers, CMHC, Sagen and Canada Guaranty, run a version of this. It exists precisely because the eighty percent ceiling makes buyouts impossible for people who could otherwise afford to stay.

It allows financing up to ninety five percent of the home’s appraised value, rather than eighty. That extra room is usually what makes the difference between keeping the home and selling it.

The structure is worth understanding: it is treated as a purchase rather than a refinance, which is why the higher limit applies. You are, in effect, buying the other person’s share.

Some conditions come with it.

A signed separation agreement or court order is required, and it must set out the buyout terms. This is not optional and it is the item that most often holds things up. You can proceed while separated rather than divorced, provided the agreement exists.
The property must be the matrimonial home, and the person staying must occupy it.
Only one party stays on title. The other is removed.
You must qualify on your own. One income now has to carry a mortgage that two incomes used to, and this is the hard part rather than the paperwork.
Default insurance applies, because you are above eighty percent. The premium is added to the mortgage and it is not small at that loan-to-value.

What the funds can be used for differs between insurers, and this catches people out. CMHC restricts the borrowed money to paying out the other party’s equity only. Sagen is more flexible and will permit matrimonial debts and mortgage prepayment penalties to be included, provided those items appear in the separation agreement.

That difference is a genuine reason to have the agreement drafted with the financing in mind. If there are joint debts to clear, getting them named in the agreement can determine whether they can be rolled into the mortgage or have to be found in cash.

Getting the order right

The sequence matters more than people expect, and doing it backwards costs time.

Get a realistic value on the home. Not a listing estimate. An appraisal, because the lender will require one anyway and the buyout figure depends on it.
Find out what you would qualify for alone. Before the agreement is finalised. There is little point agreeing to a buyout number that no lender will fund.
Have the separation agreement drafted, with the buyout terms and any debts to be paid specified.
Then arrange the mortgage.

Most of the delay in these files comes from doing step three before step two, and discovering the agreed number does not work.

The other routes

Sell and divide. The clean option, and sometimes the right one. Nobody is tied to the other, and both people start fresh. Worth considering seriously even when someone is emotionally set on staying, particularly if keeping the home means being stretched for years.

One stays, both remain on the mortgage. Common as an interim arrangement and genuinely risky. Both of you remain fully liable for the whole debt regardless of who lives there or what the agreement says between you. The lender is not a party to your separation agreement. If the person living there misses payments, it lands on both credit files, and it counts fully against the other person’s ability to borrow for anything else. Treat this as temporary, with an actual end date.

Refinance conventionally. If there is enough equity to stay under eighty percent, a standard refinance is simpler and avoids the insurance premium.

Doing nothing

This is the most common choice and it is rarely deliberate. Payments continue, nobody addresses the title, and it drifts.

Two things get worse with time. Both parties stay jointly liable, so the person who moved out cannot realistically buy elsewhere while carrying the full obligation on their file. And the equity position keeps moving, which means the number you eventually negotiate is not the number you would have negotiated earlier.

If the relationship is over, the mortgage question does not improve by being left.

What to have ready

For the mortgage side, gather the same material as any application, plus the separation specifics.

The separation agreement or court order, signed
The current mortgage statement and the maturity date
Proof of your income on its own, without your former partner’s
Details of any joint debts and who is assuming what
Any support payable or receivable, which affects your ratios in both directions

Support is worth flagging. Payments you make count against you. Payments you receive can count as income with some lenders, provided there is an agreement and a track record of receipt. Lenders differ considerably in how they treat it, which is exactly the kind of variation worth shopping.

Our note on what to have ready covers the standard documents.

A word on how this tends to go

These files are slower than ordinary ones and the reason is almost never the mortgage. It is waiting on the agreement, waiting on a lawyer, or waiting on two people to settle a number.

What we can do is tell you early and accurately what is financeable, so the agreement gets drafted around something achievable. That single piece of information, obtained before the negotiation rather than after, saves more time and difficulty than anything else in the process.

If you are working through this, tell us where things stand. The conversation is confidential and there is no obligation attached to it.

Separation, divorce and the mortgage