Definition
Upon separation or divorce, the shared property must be settled. Two main options are available:
**Option 1: Property sale** The simplest solution. Sale proceeds, after mortgage repayment and selling costs, are shared according to the agreement or judgment. Note mortgage break penalties if the term has not expired.
**Option 2: Buyout of ex-spouse's share** One ex-spouse keeps the property and buys out the other's share. This requires refinancing to: 1. Repay the equity share owed to the ex-spouse 2. Remove the ex-spouse's name from the title and mortgage deed
The lender requires the borrower alone to qualify for the new mortgage amount. If the property was held with a CMHC-insured loan, the buyout may require new insurance if the loan-to-value ratio exceeds 80%.
Legal requirement: a simple verbal agreement is not sufficient. A notarial deed modifying the property title AND lender agreement to remove the co-responsibility of the ex-spouse are required. Without lender agreement, both parties remain responsible for the loan.