Can My Spouse Take Out a HELOC on Our Home in Ontario?

You may have found out that your spouse has borrowed against the house, or your spouse may be asking you to agree to a home equity line of credit (HELOC). Either way, the home is probably the largest asset you have, and a new debt secured against it can affect you directly.

This article explains in general terms how Ontario treats borrowing against a matrimonial home, why a lender usually asks about your spouse, and what you can do to protect yourself. Your own situation, including whether you are married and how title is held, can change the answer, so a lawyer can confirm the details.

Why the matrimonial home is treated differently

Ontario gives the home a family has lived in special protection. Married spouses generally split property acquired during the marriage equally when the marriage ends, and the spouse with the smaller share is owed an equalization payment. The family home must be divided equally unless the spouses agree to a different split, and a family home that was gifted or inherited does not count as excluded property.

Common-law couples are not in the same position. They are not legally required to split property acquired while living together, although a partner who contributed to property the other owns may have a right to part of it. If you are not married, whether these matrimonial home rules apply to you is something to confirm with a lawyer.

What the rules say about mortgages and consent

How a HELOC is treated under these rules depends on how it is set up, so it is worth confirming with a lawyer. Under Ontario land registration guidance, a transfer or mortgage of a matrimonial home under Part II of the Family Law Act requires a spousal statement, or a court order under s. 23 of the Act.

The spousal statement can say, for example, that the person consenting is the spouse, or that the spouse has released their rights by a separation agreement. In practice, that is why a lender or its lawyer asks about your marital status and may ask you to sign.

One spouse alone may designate a property as a matrimonial home on title. The designation stays on the parcel register until the registering spouse removes it, and a single designation does not release other properties from being matrimonial homes.

When a lender may still be protected

Consent rules do not always lead to a mortgage being undone. In one Court of Appeal case, a spouse tried to set aside a mortgage under ss. 21 and 23(3) of the Family Law Act. He failed because he did not prove the lender had actual or constructive notice that the borrower's partner was a spouse and that the property was a matrimonial home.

The lesson for you is practical. What a lender knew or should have known can matter, so the paperwork signed at the time of borrowing, and what was said about marital status, is worth keeping and reviewing.

How the borrowed money is treated if you separate

Whether a HELOC balance is shared, and how, depends on facts such as when the money was drawn, what it paid for, and who owns the home. A half-owner of a matrimonial home is entitled to one-half of the net sale proceeds, less any unpaid share of upkeep costs. A debt secured on the home will reduce what is left after a sale, which is why the amount owing matters.

If you think the money was spent on something that benefited only one spouse, trust claims may be advanced before equalization. If an unequal result seems unfair, the Family Law Act allows an unequal division only where equalization would be unconscionable. These are fact-heavy questions, and a lawyer or accountant can tell you how they apply to your numbers.

Spouses can also change the default rules by a domestic contract such as a separation agreement. A court may set aside a domestic contract if a party failed to disclose significant assets or debts existing when it was made, or did not understand its nature or consequences. How this applies to a particular HELOC depends on your situation, so it is worth confirming with a lawyer.

What to do next

• Get a current title search or parcel register for the home and read any charges and designations on it.
• Ask the lender for a copy of any documents signed, including any spousal statement or consent.
• Do not sign a consent or any new loan paperwork until you understand what it commits you to.
• Collect statements showing when money was drawn and where it went.
• Speak with a lawyer before making big decisions about moving out, selling or borrowing further, since how those apply depends on your situation.
• Speak with a family lawyer about whether to seek a court order or negotiate terms.

Free family information is available at Family Law Information Centres in family courts across Ontario, which give information on separation, divorce and local resources. They provide information rather than legal advice about your specific case.

Frequently asked questions