Our spousal buyout program can help eligible homeowners remain in their home after a separation or divorce by refinancing the property and using the available equity to buy out their former spouse’s interest.
When a relationship ends, deciding what to do with the family home can be one of the most important financial decisions. In many cases, the options include selling the property and dividing the proceeds, using personal funds to buy out the other party, or refinancing the home through a spousal buyout mortgage.
A spousal buyout may allow one partner to keep the existing home while providing the other partner with their agreed share of the equity. For families with children, this can also help provide greater continuity during a period of significant change.
Eligibility depends on factors such as income, credit, property value, available equity, and lender requirements. Our mortgage professionals can review your situation and explain the financing options that may be available.
Spousal Buyout FAQs
What is a spousal buyout?
A spousal buyout allows one spouse to purchase the other spouse’s interest in the family home following a separation.
Rather than selling the property and dividing the proceeds, the spouse who wants to remain in the home may be able to refinance or arrange new mortgage financing to pay out the departing spouse’s share of the equity.
How much could I potentially borrow?
Consider a home valued at $600,000.
Under a conventional refinance, borrowing would generally be limited to approximately $480,000, or 80% of the property’s value.
With a qualifying spousal buyout, financing could potentially be as high as approximately $565,000 before the mortgage-insurance premium.
That represents as much as $85,000 in additional financing that may be available to complete the buyout or, where permitted, address eligible joint debts included in the separation agreement.
The actual amount available will depend on the property value, existing mortgage balance, required buyout amount, mortgage-insurance requirements and the borrower’s ability to qualify.
What can the mortgage funds be used for?
The funds are generally used to:
- Pay out the existing mortgage;
- Pay the departing spouse their agreed share of the equity; and
- Depending on the lender and mortgage insurer, address certain jointly held debts included in the separation agreement.
The exact use of funds and eligible debts will depend on the lender, mortgage insurer and circumstances of the separation.
Can child support or spousal support help me qualify?
Potentially.
Child or spousal support being received may be considered income for mortgage qualification when it is properly documented and expected to continue.
Some lenders may use 100% of qualifying support income, while other lenders may have different limits or documentation requirements.
If you are required to make child or spousal support payments, those payments must also be considered when the lender assesses your financial obligations.
Why is the separation agreement so important?
The separation agreement establishes the financial obligations of each spouse.
It can identify:
- Who will retain the home;
- How much one spouse must pay the other;
- How joint debts will be handled;
- Child-support obligations; and
- Spousal-support obligations.
A signed separation agreement can also be important if either spouse intends to purchase another property because lenders may need documentation confirming the borrower’s continuing financial obligations.
Should I speak with a mortgage broker before finalizing the separation agreement?
It can be very helpful.
If one spouse wants to keep the property, determining the available financing before the agreement is finalized can provide a much clearer picture of what is realistically possible.
A mortgage broker can review the estimated property value, existing mortgage, proposed buyout amount, income, debts and support obligations to determine potential qualification and monthly payments.
Where should I start?
Start the conversation early.
If you or someone you know is going through a separation, reach out before finalizing the agreement or making decisions about the property.
I can confidentially review the estimated buyout, qualification requirements and potential monthly payments so you have a clearer understanding of what may be possible.
Is a spousal buyout the same as a regular refinance?
Not necessarily.
With a conventional refinance, homeowners are generally limited to borrowing up to 80% of the home’s value.
A qualifying spousal buyout may instead be treated as a purchase transaction and may potentially allow financing above the normal 80% refinance limit through an insured mortgage.
This can make a significant difference when there is substantial equity in the property but the spouse keeping the home does not have enough cash available to buy out the other spouse.
What would the mortgage payment look like?
Using the same $600,000 property example and, for illustration purposes, a mortgage rate of 4.50% with a 25-year amortization:
A mortgage at the conventional refinance limit would have a monthly payment of approximately $2,657.
If the maximum spousal-buyout amount and mortgage-insurance premium were financed, the monthly payment would be approximately $3,252.
These figures are for illustration only. Actual mortgage payments will depend on the mortgage amount, interest rate, amortization, applicable insurance premium and mortgage terms available when the financing is arranged.
Does the spouse keeping the home still have to qualify?
Yes.
A spousal buyout does not eliminate the normal mortgage qualification requirements.
The spouse keeping the home must qualify for the new mortgage based on factors such as:
- Income;
- Credit;
- Existing debts;
- Mortgage amount; and
- The applicable mortgage stress test.
This is why it can be helpful to determine qualification early in the separation process rather than waiting until the separation agreement has already been finalized.
What documents will I need?
Lenders will typically require documentation such as:
- A signed separation agreement outlining the division of the property, debts and support obligations;
- Documentation confirming the agreed buyout amount;
- An appraisal confirming the property’s current market value; and
- Legal documentation transferring the departing spouse’s interest in the property.
Requirements can vary depending on the lender, mortgage insurer and province.
Are there additional costs involved?
Yes.
Depending on the circumstances, additional costs may include:
- Mortgage-insurance premiums;
- Legal fees;
- Appraisal fees;
- Land-transfer or registration costs; and
- Penalties for breaking the existing mortgage.
These costs should be considered when calculating whether the spousal buyout is financially workable.
What if a friend or family member is going through a separation?
Sometimes simply knowing that selling the home is not the only possible option can help.
If someone you know is separating and wants to remain in their home, encouraging them to investigate a spousal buyout before making final decisions about the property may give them another option to consider.