CMHC Spousal Buyout Program: How to Keep Your Home After Divorce
CMHC Spousal Buyout Program: How to Keep Your Home After Divorce
Most Canadians who want to keep the matrimonial home after divorce hit the same wall: conventional refinancing caps at 80% loan-to-value, and they don't have enough equity to buy out their ex-spouse with a 20% down payment on short notice. The CMHC Spousal Buyout Program exists specifically to solve this problem.
What the Program Actually Does
The CMHC spousal buyout allows the purchasing spouse to refinance up to 95% of the home's appraised value — the same loan-to-value ratio as a first-time buyer — to fund the equalization payment owed to the departing spouse. Without this program, you'd need to come up with tens of thousands in cash or sell the property.
The key requirement: you must have a signed separation agreement or court order that assigns the home to you and specifies the buyout amount.
Eligibility Requirements
To qualify for the CMHC spousal buyout, you need:
- A signed, legally binding separation agreement or court order specifying the property division
- The ability to qualify for the new mortgage on your individual income (the lender stress-tests at the contract rate plus 2%, or the benchmark rate, whichever is higher)
- The property must be your principal residence
- Standard CMHC mortgage insurance premiums apply (2.8% to 4.0% of the loan, added to the mortgage balance)
The departing spouse's name must be fully removed from both the mortgage and the property title as part of the transaction.
How the Process Works in Practice
Step 1: Get the home appraised. The lender orders an independent appraisal to establish current market value. This determines your maximum borrowing limit at 95% LTV.
Step 2: Apply through your lender. You apply for a new insured mortgage. The lender submits the application to CMHC (or Sagepoint, or Canada Guaranty) for insurance approval. You'll need your separation agreement, proof of income, and the appraisal.
Step 3: Closing and title transfer. At closing, the new mortgage pays off the existing one, the equalization payment goes to your ex-spouse, and a lawyer registers the title transfer removing your ex-spouse from the deed.
In Prince Edward Island, the title transfer is registered through the PEI Registry of Deeds. You'll also need to file an Affidavit of Purchaser as part of the land transfer documentation.
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Insurance Premiums and Costs
CMHC insurance premiums on a spousal buyout are the same as any high-ratio mortgage:
- 85.01% to 90% LTV: 2.80% premium
- 90.01% to 95% LTV: 4.00% premium
On a $300,000 mortgage at 95% LTV, that's a $12,000 premium added to your balance. It sounds steep, but compare it to selling the home (5% realtor commission on a $315,000 home is $15,750, plus moving costs and land transfer taxes on a new purchase).
Common Mistakes That Delay the Buyout
Signing the separation agreement before getting pre-approved. If your agreement specifies a buyout amount that exceeds what you qualify for at 95% LTV, you're stuck. Get mortgage pre-approval first, then negotiate the equalization figure.
Not accounting for the insurance premium. The premium is added to your mortgage balance, so your total debt will exceed the appraised value temporarily. Make sure your monthly payment is sustainable.
Forgetting to update your property insurance. Once the title transfers, your home insurance must reflect sole ownership. Joint policies become void, and a gap in coverage during this transition leaves you exposed.
Timeline Expectations
From application to closing, a CMHC spousal buyout typically takes 30 to 60 days — similar to a standard refinance. Factor in another two to four weeks if your separation agreement needs amendments to satisfy the lender's legal requirements.
The Prince Edward Island After-Divorce Checklist walks you through the complete mortgage and title transfer sequence, including exactly when to coordinate the buyout with your other post-divorce document updates.
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