Posted by Maryann Quenet on Wednesday, April 16th, 2025 8:41am.
Going through a separation or divorce is never easy. Beyond the emotional challenges, there are important decisions to make—especially when it comes to your shared home. You might be wondering: “Can I keep the house?” or “How do I buy out my ex’s share?” This is where a spousal buyout comes in.
A spousal buyout allows one partner to take full ownership of the home by buying out the other’s share. It’s a common solution for couples who want to avoid selling their home, especially when children are involved or when one partner wishes to stay in the family home.
In this blog, we’ll break down what a spousal buyout is, how it works, and what steps you need to take. This guide will help you understand your options in clear, simple terms.
A spousal buyout is a financial arrangement during a separation or divorce where one partner purchases the other’s interest in a jointly owned property. This allows the buying partner to assume full ownership of the home, while the other partner receives financial compensation for their share.
Key Points:
Equity Calculation: Determine the home's current market value and subtract any outstanding mortgage to find the equity.
Buyout Amount: Typically, the buying partner pays half of the equity to the other partner.
Mortgage Refinancing: The buying partner may need to refinance the mortgage to fund the buyout.
There are several reasons why a spousal buyout might be the right choice:
Stability: Keeping the family home can provide emotional and financial stability, especially for children.
Avoiding Market Fluctuations: Selling a home during a downturn can lead to financial loss. A buyout allows one partner to retain the home until the market improves.
Simplified Process: A buyout can be quicker and less stressful than selling the home and dividing the proceeds.
Before proceeding, it's essential to have a legally binding separation agreement that outlines the terms of the buyout, including the agreed-upon value of the home and the division of assets.
Hire a professional appraiser to assess the current market value of the property. This ensures a fair and unbiased valuation.
Subtract the remaining mortgage balance from the home's appraised value to determine the equity. Then, divide the equity according to the terms of your separation agreement to find the buyout amount.
The buying partner will need to qualify for a new mortgage or refinance the existing one to cover the buyout amount. Lenders will assess income, credit history, and debt levels during this process.
Once financing is secured, legal documents are signed to transfer ownership, and the buyout amount is paid to the selling partner. The buying partner becomes the sole owner of the property.
When planning a spousal buyout, consider the following financial aspects:
Mortgage Qualification: Ensure you can afford the new mortgage payments on your own.
Additional Costs: Be prepared for appraisal fees, legal fees, and potential mortgage penalties.
Joint Debts: Decide how to handle any joint debts, such as credit cards or loans, as part of the buyout agreement.
In Ontario, the following legal requirements must be met for a spousal buyout:
Separation Agreement: A formal agreement outlining the division of assets and terms of the buyout.
Title Transfer: Legal documentation to transfer ownership of the property to the buying partner.
Mortgage Approval: The buying partner must qualify for the mortgage independently.
If a spousal buyout isn't feasible, consider these alternatives:
Selling the Home: Sell the property and divide the proceeds according to the separation agreement.
Co-Ownership: Continue to co-own the home temporarily, with one partner living in the property and both sharing expenses.
Deferred Sale: Agree to sell the home at a later date, allowing one partner to remain in the home for a specified period.
Navigating a spousal buyout can be complex, but you don't have to do it alone. The Johnson Team, a renowned name in Toronto's real estate market, is here to help. With unparalleled market knowledge and a commitment to individualized service, Jeff and Liz Johnson lead a team of experts ready to guide you through every step of the process.
Whether you're buying out your partner or selling your home, trust The Johnson Team to prioritize your needs and exceed your expectations. Please contact The Johnson Team to start working with an agent right away.
Note: This blog is for informational purposes only and does not constitute legal or financial advice. Always consult with a professional advisor for your specific situation.