Mortgage & Divorce: What You Need to Know

Insights from Edmonton Mortgage Broker Sandra Forscutt

Divorces and separations are among life’s most challenging experiences. As a Mortgage Broker with years of experience, I know firsthand that these major life transitions come with a whole slew of complex financial decisions that need to be handled with care. One of the largest is the mortgage. I am here to help you with some of the essential steps to take during a separation.

Understanding the Process

Most divorces, especially those involving a matrimonial home, start with negotiating a Separation Agreement. This outlines custody arrangements, financial obligations, and the division of marital assets and debts.

Options for Exiting a Joint Mortgage

Sell the Property

One popular route is to put the property on the market. Selling the house and using the profits to settle any outstanding debts is a straightforward solution. Whatever equity is left over can be split between you and your former partner, giving you both a fresh start.
It’s a clean break that allows you to walk away with your portion without any lingering financial ties.


Release of Covenant

Going through a split can be messy enough without having to deal with complex financial settlements. That’s where the “Release of Covenant” comes in handy. Essentially, you can ask your mortgage lender to let your former partner take over the mortgage solo, without any cash changing hands.
It’s a straightforward solution that can save you both a lot of headaches. Instead of getting bogged down in dividing assets and liabilities, you can simply transfer the mortgage responsibility to your ex. No need for complicated calculations or lump-sum payments.
Of course, your lender will have to approve the request, but it’s often a viable option, with a stable income and good credit history. It’s a clean break that allows you to move on without the added stress of untangling a joint mortgage.



If there is enough equity in the home, you may choose to refinance the mortgage in your own name, buying out your previous spouses’ share. This option requires you to meet the lender’s criteria for a new mortgage loan and may involve a different interest rate.


Spousal Buyout Program

In Canada, there’s a mortgage program that allows one party to buy out the other with minimal equity requirements (5%). This option requires a separation agreement, appraisal, and offer to purchase. You must then demonstrate the ability to qualify for the mortgage independently.
This program takes away the stress of having to come up with a massive down payment or risk losing your home. Instead of starting from scratch, you get to keep the home, while your former partner gets a clean break financially. It’s a win-win situation that can help make your divorce a little bit easier to swallow.v

What Do I Do Next?

Divorces or relationship breakdowns are often emotionally and financially difficult. However with careful planning and legal guidance, you can navigate the complexities of managing a mortgage smoothly. If you’re facing a mortgage dilemma during a separation, don’t hesitate to seek guidance from a mortgage professional. I can provide personalized advice tailored to your situation. Your financial future awaits, even amidst life’s storms.