What Happens to Your Mortgage During a Divorce in Ontario?

Both Names on the Mortgage — Both Responsible

If both spouses are on the mortgage, both remain legally responsible for the payments — regardless of who is living in the home or what your separation agreement says. Until the mortgage is discharged, refinanced, or the property is sold, both parties are on the hook.

This is one of the most important reasons to move quickly on the home sale: every month that the mortgage goes unpaid (or is paid by only one party without reimbursement) creates financial and legal complications.

Option 1: Sell the Home and Discharge the Mortgage

The cleanest solution in most cases is to sell the home, use the proceeds to pay off the mortgage, and divide whatever equity remains according to your separation agreement.

A neutral realtor ensures this process is handled fairly — both parties receive the same information, both approve the listing strategy, and the final closing statement is transparent. DivorceAgentConnect agents are experienced managing the financial aspects of a separation sale in coordination with both parties' lawyers.

Option 2: One Spouse Buys Out the Other

If one spouse wants to keep the home, they need to:

1. Qualify for the mortgage on their own income 2. Refinance to remove the other spouse from the mortgage 3. Pay the other spouse their share of the equity

This requires a formal appraisal, lender approval, and legal documentation. Not everyone qualifies — especially given how much GTA property values have risen. A mortgage broker experienced in separation buyouts can assess your options.

If the buyout price is disputed, a neutral appraisal commissioned by both parties (rather than one) carries much more weight.

What If You Can't Afford the Payments During the Sale?

If neither party can comfortably carry the mortgage alone during the sale process, there are a few options:

• Both parties continue contributing proportionally • One party pays and is reimbursed from the sale proceeds • You approach your lender about a mortgage deferral (some lenders offer hardship provisions)

Missing mortgage payments during a separation damages both parties' credit and can complicate the sale. It's important to have a clear written agreement — even an informal one — about who is responsible for payments until closing.

Tax Implications

In most cases, the sale of a principal residence in Canada is exempt from capital gains tax under the Principal Residence Exemption (PRE). However, if the property has been used partially for income (e.g. a rental unit) or if there are questions about which property qualifies as each party's principal residence, tax implications can arise.

Consult a tax professional or your accountant before closing to ensure both parties understand their tax obligations. The Canada Revenue Agency (CRA) has specific rules about principal residence designations during separation.