Spousal Buy‑Out Mortgages in Ontario: How to Keep the Family Home After a Separation

February 1, 2026 | Posted by: Lorne Andrews

Spousal Buy‑Out Mortgages in Ontario: How to Keep the Family Home After a Separation
by Lorne Andrews Mortgage Broker

Divorce or separation is emotionally draining, and the financial decisions around the family home can add even more stress. For many couples, the home is their largest asset; without planning, one partner might have to sell the house in order to give the other their share of the equity. Fortunately, Canada’s mortgage insurers (including the Canada Mortgage and Housing Corporation [CMHC] and Sagen) offer a spousal buy‑out program that allows one spouse to buy out the other’s share without forcing a sale. This Ontario‑focused guide explains how spousal buy‑out mortgages work, who qualifies, and the steps to complete a buy‑out while minimizing tax and legal complications.

What Is a Spousal Buy‑Out Mortgage?

A spousal buy‑out mortgage is a type of insured mortgage designed specifically for couples who are separating or divorcing. Unlike a regular refinance—which typically allows you to access up to 80 % of a home’s value—this program treats the transaction as a purchase. Because it falls under purchase rules, borrowers can access up to 95 % of the home’s appraised value. The extra access to equity often makes the difference between keeping the home and having to sell it. Matrimonial debt and lump‑sum equity payments can be included in the mortgage provided the total does not exceed the 95 % loan‑to‑value (LTV) cap.

Why Choose a Spousal Buy‑Out?

• Maintain stability for children and family: Selling the family home can be disruptive, especially when children are involved. By refinancing under the spousal buy‑out program, the staying spouse can keep the property and avoid moving costs and real‑estate commissions. The Mortgage Centre notes that selling can be expensive due to real‑estate fees, bank mortgage penalties and moving expenses.

• Access more of the home’s value: Traditional refinancing only allows up to 80 % of the appraised value, but the spousal buy‑out program unlocks up to 95 %, making it easier to buy out your partner’s equity and pay off joint debts.

• Simplify asset division: Including the equity payout and joint debts in the mortgage lets both partners move on sooner, rather than having to wait to sell the property.

Who Qualifies for a Spousal Buy‑Out Mortgage?

To use the spousal buy‑out program, the following criteria generally apply (these rules are set by mortgage insurers and lenders, but there may be slight variations between lenders):

• Primary residence: The property must be your principal residence. Investment properties are not eligible.

• All parties on title: Both (or all) parties involved in the separation must currently be registered on the property’s title. The solicitor will verify ownership through a title search.

• Legal separation agreement: You need a finalized, signed separation agreement outlining how assets will be divided. The agreement should include details like equity payable to the leaving spouse and any joint debts to be repaid. For non‑married couples (friends or siblings) a similar contract can be drafted with insurer approval.

• Purchase agreement and affordability: Because the transaction is treated as a purchase, lenders require a purchase agreement—sometimes called a “spousal buy‑out agreement”—along with the separation agreement. The buying spouse must be able to qualify for the new mortgage on their own income; the loan amount cannot exceed 95 % of the home’s value.

• Use of funds restricted to equity buy‑out and joint debts: Net proceeds from the mortgage can only be used to buy out the other owner’s share or to pay off joint debt as explicitly set out in the separation agreement. Renovations or personal loans are not permitted.

• Maximum loan‑to‑value: The total mortgage (existing balance plus equity payout and any joint debts) cannot exceed 95 % of the appraised value. In some cases the allowable amount may be less if the existing mortgage plus buy‑out amount is lower than 95 %.

• Full appraisal required: Because the transaction is similar to a private sale, lenders require a full appraisal of the property, which typically costs around $350 – $450.

• Debt consolidation (optional): In some cases lenders may allow joint debts to be consolidated into the new mortgage to improve affordability, but these debts must be listed in the separation agreement.

Step‑by‑Step Process for Completing a Spousal Buy‑Out in Ontario

1. Negotiate a separation agreement. Work with lawyers to draft a separation agreement that outlines how the property and any joint debts will be divided. Include a purchase price for the home and specify the equity payout and debts to be paid.

2. Obtain a full appraisal. Contact a certified appraiser to determine the property’s current market value; this figure will determine the maximum mortgage amount (up to 95 % of value).

3. Pre‑qualify for the mortgage. Meet with a mortgage broker or lender to confirm that you can qualify for the new mortgage on your own income and within the 95 % LTV limit.

4. Draft a purchase agreement. In addition to the separation agreement, lenders require a purchase agreement showing the buying spouse is purchasing the other’s share. Your lawyer can prepare this document to reflect the agreed‑upon buy‑out price.

5. Submit your application. Provide the lender with your separation agreement, purchase agreement, appraisal, proof of income and other required documents. The lender will underwrite the new mortgage as a purchase and request mortgage default insurance (from CMHC, Sagen or Canada Guaranty).

6. Finalize the transaction and update title. Once the mortgage is approved, funds are advanced to pay off the existing mortgage, buy out the leaving spouse’s share and pay any joint debts. Your lawyer updates the property title so that only the staying spouse remains on title.

7. Consider tax and legal advice. The mortgage process goes hand‑in‑hand with legal and tax considerations. Consult your lawyer or accountant to ensure there are no unexpected tax consequences and that you are properly protected.

Ontario‑Specific Considerations: Land Transfer Tax (LTT)

Ontario imposes a land transfer tax when property is transferred; Toronto residents pay an additional municipal LTT. Transfers between spouses or former spouses are generally taxable unless they fit an exemption. The Ontario Ministry of Finance’s land‑transfer‑tax FAQ notes that a transfer will be exempt only if one of these situations applies:

1. The only consideration is assuming an existing mortgage. If the buying spouse simply assumes the mortgage and no extra consideration is paid, the transfer is exempt.

2. The transfer complies with a written separation agreement. A written agreement where the spouses agree to live separate and apart can exempt the transfer from LTT. Minutes of settlement are acceptable if they state that the parties will live separately.

3. The transfer is pursuant to a court order. Court‑ordered transfers are also exempt.

If one spouse pays the other for their interest in addition to assuming the mortgage, the transfer does not fit the first exemption. However, transfers made under a valid separation agreement or court order may still qualify for the second or third exemptions, which help reduce costs during a marital breakdown. To claim the exemption in Ontario’s electronic registration system, specific statements (e.g., Statement 9085) must be included; a real‑estate lawyer can prepare these documents.

Frequently Asked Questions

Is a separation agreement mandatory? Yes. Lenders require a finalized separation agreement with clear asset and debt allocations. Without it, most mortgage insurers will not approve the loan.

What can the proceeds be used for? Only to buy out the other owner’s share of the home and/or pay off joint debts specified in the separation agreement. Funds cannot be used for renovations or personal expenses.

How much can I borrow? The total mortgage amount—including the existing balance, equity payout and joint debts—cannot exceed 95 % of the home’s appraised value. In some cases, the allowable amount may be lower if the remaining mortgage plus buy‑out amount is less than 95 %.

Do all parties need to be on title? Yes. Everyone involved must currently be registered on title. The spousal buy‑out program cannot be used to buy out someone who isn’t on title.

Can unmarried partners use the program? Yes. Friends, siblings or common‑law partners who co‑own a property may also qualify, provided the mortgage insurer approves and a separation‑style contract outlines the buy‑out.

Is an appraisal always required? Yes. A full appraisal is mandatory and generally costs between $350 and $450. Lenders will not rely solely on automated valuation models for spousal buy‑outs.

Key Takeaways

• The spousal buy‑out program is designed for divorcing or separating couples who wish to keep their home; it allows access to up to 95 % of the property’s appraised value—much more than a standard refinance.

• Eligibility requires the property to be a principal residence, both parties to be on title, and a signed separation agreement. The proceeds must be used only for buying out equity and paying joint debts.

• Lenders will need a purchase agreement, proof that the buying spouse can afford the mortgage alone, and a full appraisal.

• In Ontario, transferring property to a spouse or ex‑spouse may be exempt from land transfer tax when done under a written separation agreement or court order.

Conclusion

A spousal buy‑out mortgage can be a lifeline for couples navigating a separation. By treating the transaction as a purchase, borrowers gain access to more equity, enabling them to compensate their partner without selling the home. However, the process is complex and involves legal agreements, appraisals, mortgage‑insurance rules and tax considerations. Working with an experienced Ontario mortgage broker and real‑estate lawyer is essential to ensure your buy‑out is completed correctly and that you take advantage of any land transfer tax exemptions available. If you’re facing a separation and want to explore your options, contact our Optimal Finance team for personalized advice.

Let’s Talk Through Your Options

Divorce and separation come with enough uncertainty — your mortgage decisions shouldn’t add to it. Whether you’re looking to keep the family home, complete a spousal buy-out, or understand your refinancing options in Ontario, a clear plan can make all the difference.

Let’s connect by phone or Zoom at a time that works for both of us.
We’ll review your situation, outline realistic options, and map next steps — calmly and confidentially.

???? Book your appointment here:
https://calendly.com/lorneandrews/meeting

Lorne Andrews
Mortgage Broker | Principal Broker
Dominion Lending Centres Expert Financial
Lic# 12129

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