Understanding your financing options when a relationship ends and a new chapter begins.
In This Blog:
Going through a separation or divorce is emotional – and when a home and mortgage are involved, things can get even more complex. But here’s the good news: there are clear, practical options available to help you move forward, whether you’re the one staying in the home or you’re looking to purchase something new. Let’s walk through the most important things to consider when it comes to your mortgage after a relationship breakdown.
Refinancing to Keep the Home
If you and your ex-spouse own a home together and there’s more than 20% equity in the property, we may be able to complete a traditional refinance. This allows one party to buy the other out and remove them from both the mortgage and the title. This is often the simplest and most straightforward route (as long as there’s sufficient equity and income to qualify).
What do I need to refinance?
Since refinancing involves completely dissolving the mortgage and replacing it with a new one, you will need to qualify again. This includes:
- Sufficient income to carry the mortgage on your own. Banks will look at your debts and expenses versus what you bring in each month to help determine whether you are able to manage the mortgage payments.
- A credit score above 680 to qualify for a traditional mortgage (but we have options if your credit doesn’t quite meet that threshold).
What if There’s Not Enough Equity?
If there isn’t quite enough equity to refinance traditionally, there are other options. Canada has a default insurance Spousal Buyout Program designed specifically for these situations.
This program allows you to refinance all the way up to 95% loan-to-value (LTV), which means you can borrow more against the home’s value than a standard refinance would allow. The person keeping the home essentially purchases the property from themselves and their ex-spouse. A significant benefit of this program is that if your joint debts are included in the separation agreement, they can often be paid out with the mortgage funds as well – helping you start fresh.
Why an Official Separation Agreement Matters
No matter which option you’re considering, a fully signed separation agreement is required. Lenders need this document to confirm:
- Who (if anyone) is keeping the home.
- Whether one party is buying out the other.
- How joint debts are being handled.
- Any spousal support being paid or received.
These details play a major role in your mortgage qualification. For example, support payments can either be counted as income or as a debt, depending on your role in the agreement.
If You’re Not Keeping the Home
One benefit if you’ve gone through a separation and are not the party keeping the home is that you may qualify as a first-time homebuyer again – even though you’ve owned a home before. That means you could have access to programs like:
- The First Home Savings Account
- RRSP Home Buyers’ Plan (HBP) – allowing you to pull up to $60,000 from your RRSP as a down payment on a new home.
- First Time Home Buyers’ Tax Credit – which lets you claim up to $10,000 on your tax return (if you purchase a qualifying home).
These programs can help make buying your next home more affordable and accessible.
An Important Reminder
Before making an offer on a new property, make sure your separation agreement is fully signed and finalized. Your mortgage broker is here to help guide you through the process, and a finalized agreement will protect you and make sure your next move is financially secure.
Every situation is unique. If you’re navigating a separation and aren’t sure where to start, reach out to us anytime. Our team is here to support you with advice that’s honest, practical, and tailoured to your circumstances.
