Going through a separation is never easy. There are emotional, financial, and legal implications to navigate, and if you own a home together, one of the biggest challenges can be deciding what to do with your joint mortgage.
In Canada, separating from a spouse or common-law partner while holding a joint mortgage means you’ll need to address who remains responsible for the loan, what happens to the property, and how to protect your credit and financial future. The good news is that with the right advice and planning, there are solutions to suit a variety of circumstances.
This article walks you through your main options and how a mortgage broker can support you during this transitional time.
Understanding Joint Mortgages in Canada
A joint mortgage is when two or more people apply for and share responsibility for a mortgage loan. In most cases involving couples, both names are on the mortgage and on the property title, making each person equally responsible for the debt, regardless of how much of the home they contributed financially.
When a relationship ends, this shared financial responsibility can quickly become complicated. Even if one person agrees to move out or stop paying, both parties remain legally responsible for the mortgage until a new agreement is in place.
Step One: Take Stock of Your Situation
Before making any decisions, it’s important to understand your current position. Start by gathering the following information:
- The balance left on your mortgage
- The current market value of your home
- Any penalties or fees that may apply if you break your mortgage early
- Whether you have any other shared financial commitments (lines of credit, loans, etc.)
You should also consider how amicable your separation is, as this may impact your ability to negotiate a solution together.
Your Main Options
Here are the most common paths people take when dealing with a joint mortgage after separation:
1. Sell the Home and Divide the Proceeds
This is often the simplest and cleanest option. You sell the property, use the proceeds to pay off the mortgage, and divide whatever is left based on your agreement or legal entitlement.
This route ensures that both parties can move on without being tied to each other financially. However, depending on the market and the timing, you may not walk away with as much equity as you’d hoped.
2. One Party Buys Out the Other
If one person wants to stay in the home, they may be able to buy out the other person’s share. This usually involves refinancing the mortgage in their name only.
A mortgage broker can help you determine whether you qualify to take on the full loan independently and whether there is enough equity in the home to facilitate a buyout.
You can begin this process by using our online mortgage application form. It’s confidential, commitment-free, and a great first step in understanding your refinancing options.
3. Continue Sharing the Home Temporarily
Some couples choose to co-own the home for a period of time after separation, especially if children are involved or the market conditions are not favourable for selling. This approach requires a clear legal agreement outlining who will live in the home, who pays what, and how future decisions about the property will be made.
Keep in mind that as long as both names remain on the mortgage, both parties remain fully responsible for payments, even if one person has moved out.
Things to Consider
Regardless of the path you choose, here are some key points to keep in mind:
- Credit Score Impact: Missed mortgage payments during this time can damage both of your credit scores. Communication and planning are essential.
- Legal Advice: Speak to a family lawyer to ensure your rights are protected. This is especially important when property division is involved.
- Timing: If your mortgage is coming up for renewal, now may be the best time to make a change with minimal penalty. If you’re mid-term, refinancing or breaking the mortgage could come with additional costs.
- Title Transfer: If one person is taking over the mortgage, the title of the property must be updated to reflect this change.
How a Mortgage Broker Can Help
Dealing with a mortgage during separation can be overwhelming. A mortgage broker provides objective guidance and can help you:
- Evaluate your ability to refinance
- Compare mortgage products from multiple lenders
- Calculate penalties and break-even points
- Understand how the separation may impact your borrowing capacity
At The Local Broker, we’re committed to providing compassionate, expert support to Canadians navigating life changes. We understand the emotional and financial weight of these decisions and work to make the process as smooth and clear as possible.
Ready to Talk?
You don’t have to figure it out alone. Whether you’re exploring your refinancing options, preparing to sell your home, or just need advice on what to do next, we’re here to help.
Contact The Local Broker today for confidential support tailored to your situation.
