Spousal Buyout Mortgages: Can You Borrow More Than 80% of Your Home’s Value?

A regular refinance usually stops at 80% of your home’s value. That can leave you short when you’re buying out your spouse. Some insured spousal buyout programs let you borrow up to 95%. This guide works through an example with real numbers. It covers the mortgage insurance premium and the Ontario sales tax on it, the stress test you still have to pass, and the paperwork lenders want before you apply.

Want to see how much you’d need to borrow? Try the free Matrimonial Home Buyout Calculator: https://divorcethesmartway.ca/tools/matrimonial-home-buyout/

Ken S. Maynard, AP.fm, CDFA | Divorce the Smartway
General information only, not legal or financial advice.

Transcript

1. Ontario Matrimonial Home Guide Spousal Buyout Mortgages: Can You Borrow More Than 80%? What insured buyout programs offer, what they cost, and who qualifies. Ken S. Maynard, AP.fm, CDFA Divorce the Smartway divorcethesmartway.ca
2. The usual limit A regular refinance usually stops at 80% of your home’s value. That 80% is called the loan-to-value limit: the most you can borrow compared with what the home is worth. If the old mortgage plus the cash for your spouse comes to more than that, a regular refinance won’t cover it. divorcethesmartway.ca · 2
3. Example: Marie and Luc Marie is $20,000 short Marie keeps the house Amount Appraised value $700,000 Current mortgage $460,000 Luc’s half of $240,000 equity + $120,000 Mortgage Marie needs $580,000 Most a regular refinance allows $560,000 Example figures for illustration only · divorcethesmartway.ca · 3 Marie needs to borrow about 83% of the home’s value. 80% of $700,000 is $560,000. The gap is $20,000, and Marie doesn’t have it in savings.
4. The spousal buyout option Some lenders can go up to 95% Regular refinance Insured spousal buyout 80% 95% of the home’s value of the home’s value, at most The loan is backed by mortgage default insurance from CMHC or a private insurer such as Sagen. Not every lender offers it, so ask a mortgage broker early. Program rules change; confirm with a lender or broker · divorcethesmartway.ca · 4
5. The cost The insurance isn’t free Premium at 83% borrowed Ontario sales tax on it Marie’s new mortgage $16,240 $1,299 $596,240 2.80% of $580,000, added to the mortgage 8% of the premium, paid in cash at closing $580,000 plus the premium The more you borrow, the higher the premium rate. Borrowing just over 80% costs less than borrowing 95%. Example figures; premium rates set by the insurer · divorcethesmartway.ca · 5
6. Still on your own income You still have to pass the stress test Marie’s numbers (monthly) Amount Real payment at 4.19% $3,198 Test payment at 6.19% $3,882 Property tax and heat $540 Income needed at 39% $136,000 $596,240, 25-year amortization, example rates · divorcethesmartway.ca · 6 A bigger loan doesn’t lower the bar. You qualify at the higher of 5.25% or your rate plus 2%. Support written into your separation agreement may count as income. Ask the lender how they treat it.
7. Before you apply The lender will want the deal in writing first. A signed separation agreement that sets the home’s value and the buyout amount. divorcethesmartway.ca · 7 Proof of your own income, plus any support set out in the agreement. A home priced under the insured mortgage limit, currently $1.5 million.
8. Free tool See how much you’d need to borrow The Matrimonial Home Buyout Calculator works out your equity, your loan-to-value and the lender’s ratios. You can get a Spousal Buyout Analysis report by email. divorcethesmartway.ca/tools/matrimonial-home-buyout/ divorcethesmartway.ca · 8
9. Close to the limit? Let’s look at your options. Book a free Get Acquainted Call by phone or video. We’ll check whether a buyout program, an asset trade or a sale fits your settlement best. Ken S. Maynard, AP.fm, CDFA Divorce the Smartway 416-849-1696 · divorcethesmartway.ca General information only, not legal or financial advice. Talk to a lawyer and a mortgage professional about your situation.