Navigating a separation brings both emotional and financial decisions—especially when a shared home is part of the equation.
In Toronto’s expensive housing market, one of the most significant decisions is whether to sell the family home or for one partner to buy out the other. And with the potential for prices continuing to climb over the long term, this choice can significantly impact each person’s financial future.
Evaluation
The first step is determining what the home is worth today. In most cases, both partners agree to a professional appraisal or real estate valuation to establish a neutral, accurate value. Keep in mind that appraisals (especially for the purposes of refinancing) are usually significantly under market value. It’s often advisable to get a few opinions of value from trusted realtors to get a realistic market value. From that number, subtract any remaining mortgage or home-related debt, any costs with disposing of the property (such as realtor fees, property preparation costs or taxes owed); what’s left is the equity. In a buyout, typically if it’s a matrimonial home, that equity is typically split evenly. This means, if one partner is to assume the home, they must pay the other their share of equity while also taking over the mortgage.
This is where affordability becomes the deciding factor.
Financing
Many Toronto homeowners are surprised by how much financing they need to secure, since the buying spouse must qualify for the full mortgage amount plus the equity payout. This financing is influenced by income, debt, and credit score, and determines whether a lender will approve the buyout. While Canada’s mortgage insurers offer spousal buyout programs that allow up to 95% financing on homes valued at $500K or less, that threshold excludes much of the Toronto market. In higher-value neighbourhoods, where detached homes and even townhouses often exceed $1M, qualifying on your own can be challenging.
Selling, on the other hand, eliminates the need to take on additional debt and allows each individual to walk away with their share of equity. But selling in Toronto doesn’t guarantee buying power afterward. With limited inventory and rising borrowing costs, re-entering the market may be difficult, especially if someone wants to stay in the same neighbourhood.
Other Considerations
Beyond finances, lifestyle matters too. Consider whether the home still suits your long-term needs. Do you still want or require something of this size? What about the location, your commute, and any maintenance costs? If you have children, it’s important to consider the impact of moving vs staying in the same home and likely the same schools. And then there’s the emotional attachment. If you stay in the home, is it going to be difficult to
remove the constant association and reminders of your former partner? It’s always difficult to make big decisions in trying times. If you’re unsure of many of these factors, renting or downsizing may provide more flexibility during a transition period.
Professional Guidance
Before making any decisions, it’s wise to consult with a family lawyer, mortgage broker, accountant, and real estate professional. Gaining clarity on the specifics of your individual situation is essential. Together, these advisors can help you understand valuation, financing pathways, tax considerations, resale expectations, and any potential challenges—drawing from their experience with clients who have navigated similar transitions.
In Toronto’s high-value marketplace, the best choice is the one that protects your stability now and for years into the future.
In our upcoming part two, we’ll help you understand fair market value and what appraisals, comparative market analysis (CMA), and bank valuations really mean.
Are you facing similar challenges in your situation? I can assist you with these complex decisions!
Are you ready to move to the next stage? Let’s chat. Send me an email (hillary@hillarylane.ca) or text/phone (416-882-4707).
