Divorce buyout

Divorce buyout

It is no secret that the family home is the most significant asset many families have.  So, what happens to this home if the couple ends up getting a divorce? Most couples begin saving for the down payment of this home as soon as they get married – or even before. However, reality is not every couple will end up together. In fact, according to Stats Canada, 30% of people who got married in 2004 will be divorced by 2038.  So, what to do if you are going through a divorce? We often get the questions: can I buy my spouse out of my matrimonial home? The answer to that is yes! But before we go on with the details, let’s see a few things one should be familiar with.

First of all, a matrimonial home, according to the Ontario Family Law Act, is “a property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence”. If you are an investor and have multiple houses, this definition will apply to them, as it underlines “every property”.  Now, the big question: how to get out of an existing mortgage? There are a few options here.

You may agree to sell the property. By doing that, you agree to sell the house and pay off the lender, along with any transaction costs, such as penalty, realtor fees, etc. Any leftover money – if there is any -, also known as “net equity”, is divided as agreed. 

The other option is the one we mentioned above: one spouse can buy the other one out of the home. In this case, the spouse to stay may be able to refinance the mortgage in their own name – buyout the other – to as much as 95% of the appraised value or the home.  This will allow the other party to be released from the mortgage and, hopefully, get enough cash for settling expenses.  It is important to know, however, that the spouse who stays cannot get cash out for their personal debts or use. Just like the split doesn’t have to be on a 50-50 basis. 

In order to do this, make sure you partner with a broker who can facilitate this process and make it easier for you. Divorce is always a tough situation. Our team is here to help you and give you the support you need.