How Does a Spousal Buyout Work During Separation?
TL;DR
- A spousal buyout means one spouse pays the other for their share of the home’s equity instead of selling.
- Ontario law typically assumes a 50/50 split of the matrimonial home.
- The buyout amount depends on current market value, mortgage balance, and sometimes joint debts or upgrade history.
- Realtor commissions and future maintenance savings are often negotiated into the buyout value.
- Mortgage limits, qualification amounts, and legal entitlements all play a role.
What is a Spousal Buyout?
A Spousal Buyout is when one partner in a separating couple decides to keep the home and pay out the other person’s share of the equity. This avoids putting the house on the market and lets one person remain in place. It’s a common route when children are involved, or when one spouse has a strong emotional or practical tie to the home.
Ontario family law assumes an equal (50/50) division of the matrimonial home, regardless of who paid more toward the mortgage or bills. Unless there’s a signed marriage contract or separation agreement that says otherwise, the home is usually split down the middle.
A “spousal buyout” is sometimes referred to as an equity buyout, or matrimonial home buyout — all describing the process of one spouse buying the other’s share of the home during a separation.
Under Ontario law, the matrimonial home has special treatment. You can read the Ontario Family Law Act here.
How to Calculate a Spousal Buyout
Market Value – Mortgage = Net Equity
Net Equity ÷ 2 = Each Spouse’s Share
Buyout = Share Paid Out to the Other Spouse
But that’s just the starting point. In practice, other elements often come into play.
Things That Can Affect the Buyout Amount:
- Who paid for upgrades or major repairs
- How much selling would have cost (commission, staging, etc.)
- Any joint debts being rolled into the refinance
- The staying spouse’s ability to qualify for a new mortgage
- Future maintenance concerns (e.g., roof, HVAC, appliances)
- Whether things are negotiated on good terms or through lawyers
Let’s Walkthrough a Spousal Buyout Example
Let’s say Jamie and Taylor are separating. Their house was appraised at $650,000 and the remaining mortgage is $360,000.
Net equity: $650,000 – $360,000 = $290,000
Each person’s share: $290,000 ÷ 2 = $145,000
So, in a basic 50/50 situation, Jamie would pay Taylor $145,000 to take full ownership of the house. But there are other factors they discuss:
- Avoided commission: A sale would have cost $32,500 in real estate commissions (5%). They agree to split this savings.
- Upgrade credit: Taylor paid $10,000 from personal savings for a new roof. Jamie agrees to credit them for $5,000.
- Future repairs: The back deck and furnace need work. They factor in $2,500 for that.
Final Buyout: $145,000 – $16,250 (commission savings) – $5,000 (upgrade credit) – $2,500 (repairs) = $122,250
What Else Should You Consider?
Joint Debts
If you have joint credit cards, car loans, or lines of credit, these should be discussed. Some couples roll joint debts into the new mortgage as part of the buyout. Personal debts cannot be included.
Upgrade History
If one spouse paid for significant improvements with their own money (like a kitchen reno or new roof), you may agree to reflect that in the final number.
Future Maintenance
The person keeping the home takes on all future repairs. If the roof is 20 years old or the windows need replacing, those costs may justify a lower buyout amount.
Mortgage Penalties & Legal Fees
If a new mortgage is required, there may be penalties or legal fees. Typically, the spouse staying in the home covers these, but it’s worth discussing.
Mortgage & Legal Notes
- Lenders in Ontario may allow the buying spouse to refinance up to 95% of the home’s value if the funds are being used to pay out the mortgage, buyout the other spouse, and consolidate joint debts. Learn more about Ontario’s land transfer tax exemptions for spouses.
- Personal (individual) debts cannot be included in the refinance.
- Legal entitlements and final decisions about who gets what fall under the lawyer’s job, not the agent or lender.
- To avoid land transfer tax on the title change, the transfer must be part of a legal separation agreement.
- See CMHC’s policy on spousal buyout financing for more detail.
Should You Pursue a Spousal Buyout, or Sell?
Before getting emotionally attached to staying, it’s a good idea to talk to a mortgage broker. They can tell you what you qualify for based on your income, debts, and credit. If the math doesn’t work, it may be smarter to sell and divide the proceeds.
Sometimes the buyout number ends up being less about exact fairness and more about what the staying spouse can actually afford. If the relationship is amicable, flexibility can go a long way.
Lawyers will often model what each spouse would walk away with if the home were sold, and then use that as the basis for a fair buyout. Sometimes a private, off-market deal is the right call. Here’s how one worked out for a recent client.
A spousal buyout can be a great solution when handled with transparency and the right professionals. The key is to start with facts (market value, mortgage balance, etc.), and then layer on negotiation points like commission savings, upgrade contributions, joint debts, and future repairs.
If you’re considering a buyout or just want to know what your options are, reach out. We can run the numbers and connect you with a mortgage broker or family lawyer who knows the ropes.
