Removing a Spouse From the Mortgage After Divorce in Ontario

Many separated spouses assume that once the divorce is final, one name will simply come off the mortgage. It is not that automatic. A court order or agreement between you and your spouse is one thing, and your agreement with the bank or other lender is another.

This article explains how the pieces fit: what the lender's role is, how you might qualify on your own, and what happens to the title and to the home in the meantime. It does not describe any one lender's rules, so confirm the details with your lender and a lawyer.

Does the lender have to agree?

In general, a lender lent money to both of you based on both of your incomes and credit. Taking one person off the mortgage changes the lender's risk, so lenders usually want to assess the remaining borrower. Whether a lender must accept a change, and on what terms, depends on your mortgage documents. Read them and ask your lender what it requires in writing.

This matters for planning. How your separation agreement or court order fits with your mortgage contract depends on your mortgage documents and your situation, so it is worth confirming with a lawyer. A lawyer can review your mortgage documents and explain what protection your agreement can include if the lender does not agree.

How property division affects the mortgage

The mortgage is part of the property calculation. Net family property is the value of property at the separation date, minus debts, less the same net value at the date of marriage, and the spouse with the larger share pays half the difference as an equalization payment. For the family home, the mortgage is deducted at separation, but not in the marriage-date calculation.

If one spouse is keeping the house, the usual practical question is how to pay the other spouse their share. That may involve a new or larger mortgage in one name. The related article on buying out a spouse's share looks at that in more detail.

Qualifying on your own

Lenders usually look at the same broad things whenever someone applies: income, credit record, existing debts and the value of the home. Specific thresholds vary and are not covered here, so ask the lender or a mortgage professional what they need.

• Employment or business income that you can document.
• Any support you receive. A court may order child support under the Divorce Act, and in deciding spousal support it considers each spouse's means, needs and circumstances. Whether the lender counts support is for the lender to say.
• Debts and credit obligations you will carry after separation.
• The size of the new mortgage needed to pay your spouse out.

If you may not qualify, raise it before you finalize an agreement. Options sometimes discussed include a different payment arrangement, selling the home or asking the lender about alternatives. A lawyer can help you weigh them.

Title, the family home and timing

Title is the record of who owns the property, and it is separate from the mortgage. Some properties have a matrimonial home designation registered on title, and whether one exists on yours is worth confirming with a lawyer. If your property has a designation, it may need to be dealt with when title changes.

While the case is ongoing, you may need a temporary arrangement. Parties commonly ask for temporary orders about who lives in the family home, and the order stays in place while the case continues. Generally, a party must attend a case conference before bringing a motion for a temporary order, except in cases of urgency or hardship. A married person can ask the court to let them stay in the home and require the spouse to leave, even if the spouse owns it, and the judge considers past violence, whether there is another suitable place to live, the children's best interests, and both parties' finances.

On timing, a divorce order is effective 31 days after it is made. The court cannot grant the divorce until it has received the Central Registry of Divorce Proceedings Clearance Certificate. Do not assume the mortgage can change on the day of the order, because the lender sets its own process.

What to do next

• Get a copy of your mortgage terms and ask the lender, in writing, what it needs to release one borrower.
• Speak with a mortgage professional about qualifying alone before you commit to a settlement.
• Gather the separation-date value, mortgage balance and all other asset and debt records.
• Complete your financial statement; Form 13.1 is used where property or debt claims are made, and it must be sworn or affirmed.
• Ask a family lawyer to draft terms that deal with the mortgage, timing, title and what happens if financing fails.
• Keep the deadline in mind: an equalization application must be made within six years of separation or two years after the divorce is final, whichever comes first.

If you agree on everything, a joint application can be filed where spouses agree. If other claims such as support, parenting or property are made, a general Form 8 is used.

Frequently asked questions