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How Spousal Buyouts Really Work

BC-focused guide to eligibility, documents, timelines, math, and how to avoid delays.

Quick summary: A spousal buyout lets one partner keep the home by paying the other partner their agreed share of equity and refinancing the mortgage into one name. Lenders typically allow up to 95% loan‑to‑value (with default insurance) when it’s a formal buyout under a separation agreement or court order. You’ll need an appraisal, income docs, and a lawyer to pay out funds and remove the ex from title and mortgage. (General info only, not legal advice.)

What is a spousal buyout?

It’s a refinance designed for separation. The new mortgage replaces the current one, pays the agreed equity to the other partner, and removes them from both title and the mortgage. Because this is a separation scenario, many lenders allow a higher loan‑to‑value than a standard refinance when the file is insured (CMHC/Sagen/Canada Guaranty).

Eligibility (plain‑language)

  • Signed separation agreement or court order that says who keeps the home and how much is being paid out.
  • Owner‑occupied: you intend to live in the property as your principal residence.
  • Loan‑to‑value up to ~95% possible when the file is insured for a formal spousal buyout; uninsured caps are usually lower.
  • Qualify on income & credit under the stress test (qualifying rate is the greater of your contract rate + 2% or the benchmark).
  • Clean title and property meets lender standards.

Documents you’ll be asked for

Borrower & income

  • Photo ID
  • Recent pay stubs + job letter (or NOAs/T1s if self‑employed)
  • Canada Child Benefit, support income (if applicable) with proof of receipt
  • Balances for any debts/loans/credit cards

Property & legal

  • Separation agreement/court order showing buyout amount/terms
  • Appraisal (ordered by the lender or approved appraiser panel)
  • Mortgage statement (with payout penalty if any)
  • Property tax notice, insurance, strata docs if applicable

Timeline (typical)

  1. Pre‑assessment (24–48h): Soft review of goals, rough value, income, debts, and buyout math.
  2. Separation agreement finalized: Amount to be paid, timing, and who keeps the home.
  3. Full application & appraisal (3–7 business days): Lender orders appraisal; you upload documents.
  4. Underwriting & conditions (3–10 business days): Income/title verification, insurer sign‑off if applicable.
  5. Lawyer/notary (1–2 weeks): Payouts are wired via trust; ex is removed from title and mortgage; new mortgage registers.

Costs & fees to budget for

  • Appraisal: typically $350–$700
  • Legal: ~$1,200–$2,000+ (both sides may have costs)
  • Title insurance & registrations: ~$250–$500
  • Discharge/registration fees: varies by lender/land title office
  • Payout penalties: check your current mortgage terms (IRDs or 3‑month interest)
  • Default insurance premium: if insured and LTV > 80%, the premium is usually added to the mortgage
  • Property Transfer Tax: Transfers under a separation agreement/court order may be exempt in BC. Confirm with your lawyer.

How the payout math works (example)

Example numbers for illustration only.

  • Appraised value: $900,000
  • Current mortgage payout: $620,000 (includes penalty)
  • Agreed equity payout to ex: $120,000
  • Estimated fees (legal, title, misc.): $4,000
  • New mortgage needed ≈ $744,000

LTV check: $744,000 ÷ $900,000 = 82.7%. That fits normal guidelines and would not require going to 95%. If you needed to go higher (e.g., payout is larger), insured spousal buyout programs can allow up to ~95% LTV.

Qualifying on income & credit

  • Debt service ratios: Lenders look at your housing costs and total debts vs. income. (Think of 39%/44% as common targets.)
  • Stress test: You must qualify at a higher “test” rate (contract + 2% or benchmark, whichever is higher).
  • Credit: Stronger credit helps with insurer approvals and rate options. Collections should be cleared first.
  • Support payments: Child/spousal support can count as income with proper documentation and continuity.
  • Your lawyer prepares a Statement of Adjustments and pays the equity to your ex from mortgage proceeds.
  • Title changes: Ex is removed from title and the new mortgage is registered in your name only.
  • PTT: Confirm if a PTT exemption applies based on your separation agreement/court order.
  • Any jointly‑secured lines of credit must be closed or re‑secured to remove the ex from liability.

Common pitfalls (and easy fixes)

  • Agreement not specific: Ensure the separation agreement clearly states the payout amount and who keeps the home.
  • Old valuation: Use a current appraisal; lenders won’t accept a casual estimate.
  • Unreported debts: Make sure all liabilities are disclosed; surprises slow approvals.
  • Rushing the close: Plan for 2–4 weeks once appraisal is ordered; legal calendars fill up fast.

FAQs

Can I add a co‑signer?

Yes, many lenders allow co‑signers/guarantors to help meet income or credit requirements.

Can I consolidate debts in the buyout?

Often yes, within the approved LTV. It’s common to roll in penalties and small debts to improve cash flow.

Is this legal advice?

No — this is general information for BC. Always confirm legal/tax matters with your lawyer and accountant.

Download Spousal Buyout Guide
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