Separating And Have A Mortgage? Start Here.
Christine Buemann • December 22, 2020
With the latest stats claiming that about half of marriages end in divorce and with around three-quarters of Canadians being homeowners, it’s important to know how to handle your mortgage if you decide to separate. Here’s a quick list of things to consider.
You need to keep making your payments.
A mortgage is a legally binding contract between you and the lender. It doesn’t take marriage into account. If your name appears on the mortgage, you're responsible for making sure the regular payments are made. A marital breakdown does not give you an excuse not to make your mortgage payments.
If during your marriage, you have relied on your spouse to make the mortgage payments and you aren’t certain payments are being made after separating, it is in your best interest to contact the lender directly to verify your mortgage is being paid. If payments aren't being made, it could affect your credit score or worse, the lender could start foreclosure proceedings.
There is always a financial cost to break your mortgage.
If, in the course of figuring out how to split your finances, you decided to either refinance your mortgage, remove someone from the title, or sell the property, keep in mind that there will be legal costs incurred.
If you’re in the middle of a term, the penalty for breaking your mortgage might be significant, especially if you have a fixed-rate mortgage. It’s certainly worth contacting your mortgage lender directly to verify the cost to break your mortgage. Having that information accessible when writing out your separation agreement will provide increased clarity.
Listing your marital status as separated or divorced.
When completing a mortgage application for securing new mortgage financing, when you list your marital status as separated or divorced, you can expect that a lender will want to see your legal separation agreement or your divorce papers. This is because they will want to ensure you aren’t responsible for any support payments to your former spouse. This can create a sticky situation, especially if you haven’t finalized the paperwork and could delay getting new mortgage financing.
It could be harder to qualify for a new mortgage.
With the separation of assets also comes the separation of incomes. If both of you have been working and you’ve qualified for your existing mortgage on a double income, you might find it hard to maintain the same quality of lifestyle post-separation as you will be reduced to being a single income household.
This is where careful planning comes in. Working closely with your independent mortgage professional will make sure you understand exactly where you stand and if you can qualify to take over the mortgage on the matrimonial home or what other options you might have.
Purchasing the matrimonial home from your ex.
There are special considerations given to people going through a separation to buy out the matrimonial home. Instead of looking at the transaction like a refinance where you can only borrow up to 80% of the property’s value, lenders will consider one spouse buying out the other up to a 95% loan to value ratio. This comes in handy when dividing assets and liabilities.
If you’d like to discuss your mortgage options, please contact me anytime.
RECENT POSTS
Going Through a Separation? Here’s What You Need to Know About Your Mortgage Separation or divorce can be one of life’s most stressful transitions—and when real estate is involved, the financial side of things can get complicated fast. If you and your partner own a home together, figuring out what happens next with your mortgage is a critical step in moving forward. Here’s what you need to know: You’re Still Responsible for Mortgage Payments Even if your relationship changes, your obligation to your mortgage lender doesn’t. If your name is on the mortgage, you’re fully responsible for making sure payments continue. Missed payments can lead to penalties, damage your credit, or even put your home at risk of foreclosure. If you relied on your partner to handle payments during the relationship, now is the time to take a proactive role. Contact your lender directly to confirm everything is on track. Breaking or Changing Your Mortgage Comes With Costs Dividing your finances might mean refinancing, removing someone from the title, or selling the home. All of these options come with potential legal fees, appraisal costs, and mortgage penalties—especially if you’re mid-term with a fixed-rate mortgage. Before making any decisions, speak with your lender to get a clear picture of the potential costs. This info can be helpful when finalizing your separation agreement. Legal Status Affects Financing If you're applying for a new mortgage after a separation, lenders will want to see official documentation—like a signed separation agreement or divorce decree. These documents help the lender assess any ongoing financial obligations like child or spousal support, which may impact your ability to qualify. No paperwork yet? Expect delays and added scrutiny in the mortgage process until everything is finalized. Qualifying on One Income Can Be Tougher Many couples qualify for mortgages based on combined income. After a separation, your borrowing power may decrease if you're now applying solo. This can affect your ability to buy a new home or stay in the one you currently own. A mortgage professional can help you reassess your financial picture and identify options that make sense for your situation—whether that means buying on your own, co-signing with a family member, or exploring government programs. Buying Out Your Partner? You May Have Extra Flexibility In cases where one person wants to stay in the home, lenders may offer special flexibility. Unlike traditional refinancing, which typically caps borrowing at 80% of the home’s value, a “spousal buyout” may allow you to access up to 95%—making it easier to compensate your former partner and retain the home. This option is especially useful for families looking to minimize disruption for children or maintain community ties. You Don’t Have to Figure It Out Alone Separation is never simple—but with the right support, you can move forward with clarity and confidence. Whether you’re keeping the home, selling, or starting fresh, working with a mortgage professional can help you understand your options and create a strategy that aligns with your new goals. Let’s talk through your situation and explore the best path forward. I’m here to help.
The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. For anyone watching the mortgage market — whether you're renewing, purchasing, or simply keeping an eye on borrowing costs — here's a breakdown of what was announced and what it may mean for you.
For many Canadians, the dream of homeownership has felt like a moving target. After years of market volatility, shifting interest rates, and economic uncertainty, you might be wondering: is 2026 finally the year to make a move?
