My spouse says our matrimonial home is worth less because of the mortgage. Is the full value included in equalization?

Your spouse is partially correct but only in a specific way. In equalization, assets are included at their net value — meaning the outstanding mortgage balance is subtracted from the gross market value to arrive at the net equity that enters the net family property calculation. If the home is worth a certain amount and there is a mortgage, only the equity (value minus mortgage) is counted.

However, the key matrimonial home rule still applies: unlike other assets, no deduction is available for the value the home had at the date of marriage. For most other assets, a spouse can subtract the value they brought in at the start of the marriage. With the matrimonial home, the full net equity at the separation date enters the calculation without a pre-marriage deduction.

So the mortgage does reduce the net equity figure, but it does not change the fundamental treatment of the matrimonial home in the equalization formula. Both spouses' net family property calculations include the equity in the home (not the gross value), and the equalization payment is based on the difference between those net family property figures.