Breaking up is incredibly difficult, and deciding what to do with the matrimonial or family home can add a heavy layer of stress. When one partner wishes to stay in the home and buy out the other’s equity, a standard refinance isn’t always the best—or even a possible—option.
Thankfully, Canada offers specialized Spousal Buyout Programs (available through default insurers like CMHC, Sagen, and Canada Guaranty) that allow the remaining spouse to finance up to 95% of the home’s value to buy out their ex-partner’s share of equity and remove them from the property title.

To see how this works, let’s look at two different scenarios for separating couples: Sarah and Mark, and Jordan and Blare.

Scenario 1: Sarah & Mark – The Traditional Refinance (The 80% LTV Limit)

Sarah and Mark own a home in Alberta currently appraised at $500,000.
  • They have an existing joint mortgage of $300,000 that needs to be fully paid out so Mark can be released from the title and mortgage debt. This leaves $200,000 in total equity.
  • Realtor Fees: Amicably, they agree to subtract a hypothetical $25,000 from the equity to account for what real estate fees would have been if they sold the home on the MLS. This adjusts the matrimonial equity to $175,000, making each of their base shares $87,500.
  • Shared Debt: They also have $12,500 in shared marital credit card debt that they want to completely pay out.
    To keep things entirely fair, Mark’s 50% share of that debt ($6,250) is subtracted from his equity buyout. This means Mark’s actual cash payout is $81,250, and Sarah will absorb the full $12,500 debt into her new mortgage to pay the credit cards off completely.
Under standard Canadian banking rules, a traditional refinance caps your borrowing at 80% of the home’s value (80% LTV).

Maximum New Mortgage Limit : 80% of $500,000 = $400,000

How the Math Works Out With the New Mortgage Money From the Proceeds of The Refinance: 
Sarah pays off the existing mortgage ($300,000), gives Mark his adjusted equity share ($81,250), and clears the joint credit card debt ($12,500). Sarah also wants to take out an additional $4,000 to pay down another personal credit card. Total funds needed: $397,750.

  • The total new mortgage fits under the $400,000 maximum mortgage allowance, meaning a standard refinance works for Sarah’s situation.
  • The Potential Problem: While this scenario fits under the 80% cap, it only leaves a tiny $2,250 buffer. If they had slightly higher joint debts to clear, or if the home appraised just a bit lower, a traditional refinance would completely fail as a viable solution.

Scenario 2: Jordan & Blare – The Insured Spousal Buyout Program (Up to 95% LTV Limit)

Jordan and Blare also own a home in Alberta currently appraised at $500,000, but their financial picture is tighter and they need higher than the 80% limit in a traditional refinance. 
  • They have an existing joint mortgage of $400,000 that needs to be fully paid out so Blare can be released from the title and debt. This leaves $100,000 in total equity.
  • Realtor Fees: Amicably, they agree to subtract the hypothetical real estate fee of $25,000. This adjusts the real matrimonial equity to $75,000, making each of their base shares $37,500.
  • They have $12,500 in shared marital credit card debt to pay out.
    To keep things fair, Blare’s 50% share of that debt ($6,250) is subtracted from his equity buyout. Blare’s actual cash payout drops to $31,250, and Jordan will absorb the full $12,500 debt into the new mortgage.
Because Jordan needs to borrow beyond the standard 80% LTV limit to cover the existing $400,000 mortgage, Blare’s payout, and the debts, a traditional refinance won’t work. Instead, they use the specialized Insured Spousal Buyout Program, which allows Jordan to borrow up to 95% of the home’s value.

Maximum New Mortgage Limit (LTV): 95% of $500,000 = $475,000

How the Math Works Out With the New Mortgage Money From the Proceeds of an Insured Spousal Buy Out Program:
Jordans new mortgage completely pays off and replaces the old $400,000 mortgage. It funds Blare’s adjusted $31,250 cash payout and pays out the $12,500 in shared debt. Jordan also includes an additional  $4,000 to pay out an individual credit card. Total needed: $447,750.
  •  Jordan successfully keeps the home on his own, he is now 100% sole owner. Blare is removed off the mortgage and title and has been paid his $31,250 in equity.
  • Since Jordan borrowed past the 80% LTV threshold, a mortgage default insurance premium will be added to the loan total, but it completely prevents them from having to sell the home on the market and move.
Important Note: Every situation is unique. Rolling shared or individual debts, or extra costs like legal fees into a new mortgage is always subject to lender and insurer approval based on internal policies and overall qualification.
What the Program DOES NOT Include
A Cash Payout for the Buying Spouse: This program is strictly designed to facilitate the clean division of matrimonial property and joint debt. The spouse staying in the home (like Sarah or Jordan) cannot use these extra funds to take out random cash for personal use, a vacation, or a separate investment. Their own remaining equity must stay tied up in the bricks and mortar of the home.

Consider in Both Programs the Need For a Lawyer and Necessary Paperwork

To make either of these options work for a lender, a handshake agreement isn’t enough. You will need a formal, legally binding Separation Agreement (which we discuss in Separation Agreements.  To process the proceeds of the mortgage and make changes to the title you will also need a Real Estate Lawyer. 
Additionally, an appraisal will often be requested to confirm the current market value of the home, and a formal Purchase Agreement may also be required by the lender. This typically happens if your Separation Agreement does not explicitly include the current appraised value of the home and the exact mathematical breakdown of the final buyout price. If those numbers aren’t clearly spelled out in the agreement, a separate purchase contract is required by the bank.

Next Steps: We’re Here to Help

Navigating a separation is incredibly challenging, but you don’t have to figure out the financing on your own. Whether you are trying to determine if a traditional refinance is possible or if an insured spousal buyout is your best path forward, we can help you model the numbers clearly, confirm your qualification capacity and guide you through the paperwork.

Mortgage Sisters West are licensed mortgage brokers who serve all of Alberta, with a focus on our local Edmonton, Sherwood Park, St. Albert, Fort Saskatchewan, Spruce Grove, Stony Plain, Beaumont, Leduc and surrounding areas!

We are mortgage brokers franchised with our National Brokerage Mortgage Architects and can broker your mortgage in other provinces as well. We would love to work with you!

Published by Mortgage Sisters West