How Much Will a Mortgage Buyout Cost in a Divorce?

Mortgage Buyout

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Divorce finalization is emotionally exhausting for both partners and can be tricky sometimes. Amongst different challenges, the major one remains how to deal with your marital home.

The most common option preferred by Canadians is a mortgage buyout. In simple terms, you have to buy out the balance amount on the mortgage from your partner.

In Canada, several lenders offer spousal buyout programs, through which you can buy out your ex-spouse mortgage. As a result, your partner’s name will be released from the mortgage. To know every aspect of buying out your partner in a mortgage, visit this page.

To make things simple for you, we have illustrated how much a mortgage buyout costs in a divorce and how to calculate buying someone out of a house.

Different Options With a House After a Divorce

Generally, there are two popular options for splitting your shared home after a divorce. However, what works best for you depends on your circumstances. It is vital to consult an attorney.

1. Sell and Split the Proceeds

It is the best possible option if:

  • Both of you do not have any attachment to the house
  • No one wants to live in the house
  • You or your ex-spouse do not have the required capital or qualify to buy out a mortgage.

In such a scenario, it is better to sell the property and divide the proceedings for a cleaner split. Community property state laws mandate to split the property in a 50/50 ratio. However, you can settle the sale proceedings out of court also.

2. Buying Out Your Partner in a Mortgage

In most cases, couples share mortgages. If you are in the same situation, it is better to “buy out” your partner in a mortgage. In this way, you can keep the property after divorce.

In this option, you have to pay a lump-sum amount to your ex-spouse equivalent to the portion they own in the house. For this, you have to determine the house’s current market value.

After the appraisal, you buy the equity of your ex-spouse in the home. If you do not have sufficient funds to buy out the equity of your partner, you can use your equity in the house to secure a home equity loan.

How Much Will a Mortgage Buyout Cost in a Divorce?

Some divorcees might want to know during the separation, who pays the mortgage? Several factors come into play during a mortgage buyout, such as your terms with your ex-spouse, whether one of you wants to live in the house, home equity, and whether or not you have children. Whatever your case may be, to help you make informed decisions, it is advisable to get professional advice. Similarly, create a roadmap and do the math beforehand.

A mortgage on a shared home is a financial obligation for both partners. If you have decided to separate, it is vital to sort out the mortgage repayment terms. If your name is on the mortgage, and another party fails to pay off the debt, it will affect your credit score.

Similarly, if you have decided to retain the house by buying out your partner after a divorce, you may have to follow these steps to estimate mortgage buyout cost.

Get an Appraisal

The first step starts with property appraisal. To put it simply, you have to calculate the house’s current market value. Generally, professional realtors are hired to do the comparative market analysis and get the exact value of the house.

Sometimes, professional appraisers are also being hired for more accurate appraisals. After the appraisal, deduct all obligations to determine the equity of your house.

Cashing Out

You can buy a spouse out of a mortgage by refinancing the loan. The most effective way is tapping into your house equity to secure a loan. Moreover, if you have sufficient equity in your house, then refinancing can help you:

  • Pay off existing mortgage or any other liens
  • Finance you to buy your spouse’s share of the equity.

The spousal buyout program is now hassle-free. Lenders in Canada can help you sail through the process in a very systematic manner. However, before approving you for a revised mortgage, the lender will evaluate if you can afford the mortgage payment or not.

Your lender may require:

  • a separation agreement (if you have one)
  • the amount of any spousal support payments
  • the amount of any child support payments

After you are approved for the mortgage, you must remove your partner from the home’s title. Thereafter, your ex-spouse will be released from the mortgage.

Home Buyout Calculation in a Divorce

If you’re looking into buying out jointly owned property in Canada, here’s how you can go about it. You should calculate the share of equity in the house for both spouses by subtracting the obligations from the appraised value. Let us understand this with an example:

  • Home’s appraised value : $500,000
  • Obligations (Existing Mortgage) : $250,000
  • Joint Equity : $250,000
  • Equity for each spouse : $125,000

It is evident from the above figures that you have to pay $375,000, which is the sum of $125,000 (Spouse’s Equity) and $250,000 (Mortgage balance), to secure the house in your name.

Alternative to Mortgage Buyout

If you don’t qualify for a home equity loan, you can negotiate with your ex-spouse with marital assets other than home equity.

For instance, in our example, your spouse’s share of equity is $125,000. If you have a balance of $250,000 in your Individual Retirement Account, then you may have to give up the whole amount to owe the house, as another partner also owns half of the IRA amount.

Other costs associated with buying out a spouse in a divorce

  • If you want to sell or break the mortgage before the end of the mortgage term, you have to pay the additional charges and prepayment penalties.
  • House appraisal cost
  • Attorney charges and legal fees for deeding the home
  • Refinancing charges


Sailing through a divorce is an intimidating task, especially when you share a mortgage. While the options are vast, the final decision depends on one’s needs and budget. Whatever the case may be, it is advisable to consult a professional attorney and a reputed lender to make informed decisions.

Buying Out a spouse in a divorce is a powerful tool for seamless settlement of the ownership of shared property. However, if not planned properly, you may end up paying more in the long run.