Separation: Buying Out the Other Half of Your Home (2026)
One spouse keeps the home by refinancing and paying the other their equity share, qualified on one income at the stress-test rate. A worked example.
A buyout is a refinance in which one spouse takes on the whole mortgage and pays the other their share of the equity. On an $800,000 home with a $450,000 mortgage, the equity is $350,000; a 50/50 split means the staying spouse needs a $625,000 mortgage (the old $450,000 plus $175,000 to the departing spouse), qualified on their income alone at the stress-test rate. At 4.49%, that requires roughly $152,600 of income. Insurers offer a spousal-buyout program allowing up to 95% financing where an ordinary refinance would stop at 80%. Land transfer tax generally does not apply to a transfer between separating spouses, and there is no capital gain on a principal residence.
Figures come from the CostToClose mortgage payment calculator.
The arithmetic
| Item | Amount |
|---|---|
| Agreed value of the home (appraisal, not a guess) | $800,000 |
| Mortgage balance | $450,000 |
| Equity | $350,000 |
| Notional selling costs sometimes deducted (5% to 6%) | −$0 to −$48,000, by agreement |
| Departing spouse's share (50%) | $175,000 (or $151,000 net of notional costs) |
| New mortgage needed | $625,000 |
| Loan-to-value | 78% |
Whether notional selling costs are deducted is a negotiation or a family-law question; it changes the buyout by $24,000 here.
Qualifying alone
| Item | Amount |
|---|---|
| New mortgage | $625,000 |
| Payment at 4.49%, 25 years | $3,456/mo |
| Qualifying payment at 6.49% | $4,183/mo |
| Property tax and heat | $777/mo |
| Income needed at 39% GDS | ≈ $152,600 |
This example was computed with the CostToClose calculator, 14 September 2026. Child or spousal support received counts as income at most lenders with a signed agreement; support paid counts as a debt. Reproduce this.
The spousal buyout program
A standard refinance is capped at 80% loan-to-value. CMHC, Sagen and Canada Guaranty each allow a spousal buyout to be treated like a purchase, financed to 95% with default insurance, provided:
- both spouses are on title and the mortgage;
- a signed separation agreement or court order sets out the buyout;
- the departing spouse comes off title;
- the funds go only to the buyout (and paying out joint debts named in the agreement);
- the property is the buying spouse's principal residence.
The premium applies as on any insured mortgage. For the example, 95% financing would allow up to $760,000, more than needed, so the program matters most when equity is thin.
Taxes and fees
- Land transfer tax: most provinces exempt transfers between spouses or former spouses under a separation agreement or court order (Ontario: exempt when the only consideration is assuming the mortgage; confirm the specific wording). Alberta and Saskatchewan: registration fees only.
- Capital gains: none on a principal residence; spousal rollovers apply to other property.
- Legal: two lawyers (one each) plus the refinance closing, typically $2,500 to $5,000 total; more if the separation is contested.
- Appraisal: $300 to $500, usually required by the lender and wise for the negotiation.
- Penalty: if the existing mortgage is broken rather than increased with the same lender, a prepayment penalty applies. A same-lender "increase and blend" avoids it.
Worked example from the calculator
Staying spouse earns $120,000 plus $1,500 a month in support under a signed agreement; departing spouse takes $175,000:
| Item | Amount |
|---|---|
| Qualifying income ($120,000 + $18,000 support) | $138,000 |
| Income needed for $625,000 | ≈ $152,600 — short |
| Options | Extend amortization to 30 years (≈ $144,200 needed); negotiate the buyout down with notional selling costs ($601,000 mortgage → ≈ $147,650 needed); add a co-signer |
Extending to 30 years plus the notional-cost deduction together bring the requirement to about $139,600, still a bit short of $138,000, but close enough that a small co-signer contribution or a slightly larger notional-cost deduction closes the rest of the gap. Reproduce this.
Frequently asked questions
How is a spousal buyout calculated?
Agreed value minus the mortgage equals equity; the departing spouse receives their share (usually half); the new mortgage is the old balance plus that payment.
Can I get 95% financing for a spousal buyout?
Yes, under the insurers' spousal buyout programs, with a signed separation agreement, the property as your principal residence, and the departing spouse removed from title.
Do I pay land transfer tax when I buy out my spouse?
Generally no. Most provinces exempt transfers between spouses or former spouses under a separation agreement or court order.
Is there capital gains tax on a spousal buyout?
Not on a principal residence. Investment properties transfer between spouses on a tax-deferred rollover.
Do I have to pay a penalty on the existing mortgage?
Not if the same lender increases and blends the mortgage. Switching lenders or breaking the term triggers the usual penalty.
Sources
- CMHC, Sagen and Canada Guaranty — spousal buyout program guidelines — checked 14 Sept 2026
- Ontario Ministry of Finance, Land Transfer Tax — transfers between spouses — checked 14 Sept 2026
- Canada Revenue Agency, transfers of property between spouses — checked 14 Sept 2026
- Family Law Act (Ontario); Family Law Act (BC) — matrimonial/family home — checked 14 Sept 2026
This guide gives general information for Canadian home buyers and sellers, checked against the sources listed above on the date shown. It is not legal, tax, or mortgage advice. Because rules and rates change, confirm current figures with your lawyer or notary, your lender, or the government office that administers the tax before relying on them.