The Program Your Bank Branch Probably Won’t Mention
When a marriage or common-law relationship breaks down, the family home is usually the largest asset — and the most emotionally charged. One spouse wants to stay. The other needs to be paid out. Standard refinancing only goes to 80% of the home’s appraised value, which often isn’t enough to cover the departing spouse’s share of equity.
The CMHC Spousal Buyout Program exists specifically to solve this problem. It allows the buying spouse to refinance to 95% of appraised value, unlocking the extra equity needed to make the buyout work — without forcing a sale.
Because the mortgage exceeds 80% LTV, mortgage default insurance is required (same as a purchase with less than 20% down). The premium is added to the mortgage balance. It’s a cost worth understanding, but for most clients it’s far less disruptive than selling in a down market, paying real estate commissions, and moving.
How the Math Works
Here’s a simplified example to show why the extra 15% matters:
Example only. Actual amounts depend on appraisal, lender qualification, and insurance premiums added to the balance. OAC.
In this example, the 95% program unlocks an additional $127,500 — which is often the difference between keeping the home and being forced to sell.
Who Qualifies
- Both spouses must be on title at the time of separation. If one partner was never on title, this program does not apply.
- The property must be the principal residence (matrimonial home). Investment properties or cottages do not qualify for this program.
- A signed separation agreement or Minutes of Settlement is mandatory. A court order works as well. This document outlines how equity is being divided.
- The buying spouse must qualify on their own for the new mortgage — income, credit, and debt ratios evaluated independently.
- Applies to both married and common-law couples who jointly owned the property.
- Minimum 5% equity in the property required. Most situations have substantially more.
Mortgage Insurance Premiums
Because the buyout mortgage exceeds 80% LTV, default insurance is required. The premium is added to the new mortgage balance — you don’t pay it upfront. Insurance is provided by CMHC, Sagen, or Canada Guaranty.
| LTV Ratio | Insurance Premium | Example ($800K mortgage) |
|---|---|---|
| Up to 85% | 2.80% | $22,400 added to balance |
| 85.01% to 90% | 3.10% | $24,800 added to balance |
| 90.01% to 95% | 4.00% | $32,000 added to balance |
The Appraisal Requirement
An independent appraisal is always ordered on spousal buyout transactions. Because the transaction is between related parties (not arm’s length), lenders and insurers will not rely on the purchase price or any agreed-upon value — they require an unbiased market value assessment by a certified appraiser. The lender or insurer orders the appraisal directly.
This protects both parties. If your home has appreciated significantly since purchase, the appraisal may unlock considerably more equity than you expected.
What Happens to the Departing Spouse?
The departing spouse is formally removed from the mortgage and, if applicable, from title. This requires a discharge from the existing lender (or a new mortgage with a lender who will take the file at the higher LTV under the buyout program). The departing spouse receives their share of equity as outlined in the separation agreement.
Important: simply being removed from the mortgage by your lender’s process is not the same as having the property transferred. A real estate lawyer must be involved to properly handle the title transfer. Paul works with lawyers who handle these files regularly and can refer you to one if needed.
What If I Can’t Qualify at an A-Lender?
Separation disrupts finances. Credit may have been damaged. Income may have changed. The primary applicant may have child support payments as a new liability. Any of these can result in a declination at a traditional lender.
This is where Paul’s broader network matters. The options available when A-lenders say no:
- B-Lenders (Trust Companies and MFCs): More flexible on income and credit. Slightly higher rates, same insured LTV limits in many cases.
- Private First Mortgage: Equity-based. No income verification. Closes in 5–10 business days. Rate is higher (8–12%+) but allows the buyout to happen now while you rebuild.
- Private Second Mortgage: If one spouse is staying in the home and needs to fund the other’s equity from a separate source without refinancing the first mortgage entirely.
The private route is not a permanent solution — it’s a bridge. A clear exit strategy (rebuild credit, improve income documentation, refinance to A-lender within 1–2 years) is built into every private file Paul structures.
Support Income and Qualification
Lenders will typically accept spousal support or child support as qualifying income, provided:
- You have received the support income for at least 3 consecutive months
- The support is documented in a legally binding separation agreement or court order
- There is a reasonable expectation the income will continue (typically assessed against the children’s ages and terms of the agreement)
The timeline matters. If you’re newly separated and haven’t yet received 3 months of support payments, a private bridge mortgage can give you time to accumulate the required history before refinancing to a conventional or insured product.
After my separation I was terrified I would lose the house. My bank said I couldn’t qualify on my own income. Paul found a program that let me buy out my ex at 95% of appraised value. We closed in three weeks and I stayed in the home my kids grew up in. I can’t say thank you enough.