Protecting Your Down Payment When Buying a Home Before Marriage

If you are buying a home before you marry, or just after, you may be putting in more money than your partner. Naturally you want to know whether your contribution stays yours if the relationship ends.

Ontario has special rules for the family home, and they surprise many people. This article explains the general approach and the tools people use to plan around it. Your own facts matter a great deal, so speak to a family lawyer as well as your real estate lawyer.

Why the family home is treated differently

Other property a spouse owned before the marriage is generally treated differently from the family home, and the increase in its value is usually shared equally. The family home is different again. In Ontario, the full value of the family (matrimonial) home must be shared on separation, even if one spouse owned it before the marriage or received it as a gift or inheritance.

It is divided equally unless the spouses agree otherwise. The Court of Appeal for Ontario has confirmed that the pre-marriage value of a home that became the matrimonial home cannot be deducted.

In practical terms, this means a down payment you paid before the wedding does not automatically earn you a credit once the home becomes the family home.

How net family property works

Ontario uses an equalization approach. Each spouse's net family property is the value of their property on the separation date, less debts and excluded property, minus the value of what they had on the marriage date less debts, with the family home left out of the marriage-date deduction. The spouse with the larger result pays half the difference as an equalization payment.

A court may only order an unequal division if equalization would be unconscionable, which is a very high threshold. Planning ahead is far more reliable than hoping to argue later.

Tools to protect your contribution

The main tool is a marriage contract. It can be signed before or during marriage, must be in writing, signed by both and witnessed, and can cover property division and who stays in the home. A domestic contract can exclude property from net family property or change the usual result.

Each partner should have a separate lawyer and exchange financial information. This helps the contract hold up and keeps it fair.

• Keep records of exactly what you contributed and when, such as bank transfers and closing documents.
• Agree in writing, before closing, how the contribution will be treated if the relationship ends.
• Use a marriage contract to set out the agreed treatment of the home and the down payment.
• Be open about any gifts from your parents and how they were meant to be used.

What a contract can safely say about a specific down payment depends on your facts and how it is drafted, so this is work for a lawyer.

If you are not married yet, or never will be

Common-law partners are not legally required to split property acquired during the relationship the way married spouses are. That does not mean there are no claims, and how you hold title and what you each paid can still matter. A lawyer can explain the options for your situation.

If you are engaged, remember that the rules above apply once you are married and the property becomes your family home. A contract signed before the wedding can set the plan in advance.

There are also time limits. The court time limit for equalization is six years from separation or two years from the divorce, whichever comes first.

What to do next

Raise the topic before you sign the agreement of purchase and sale. It can feel awkward, but it is much easier to talk about before closing than after a dispute begins.

• Write down who is contributing what to the purchase.
• Decide how you want the home and the down payment treated if you separate.
• Each book a meeting with your own lawyer.
• Ask a family lawyer whether a marriage contract makes sense for you.
• Tell your real estate lawyer about your plans so title and closing documents fit the agreement.
• Keep copies of all contracts and financial disclosure.

Frequently asked questions