We realize the title of this post could double as a tongue twister. Can you say “Does my spouse have any right to my house if I owned it before marriage in Ontario?” five times fast?
It is a common question that many of our clients ask us. We also figure that if dozens of people are voicing it, the topic is on the minds of many others.
Let’s start with the usual disclaimer for when we venture outside our area of expertise. This post should be taken for informational purposes only, not legal advice as we are not lawyers. For specific help in your personal situation, it is highly advisable to consult with an experienced attorney. With that in mind, let’s explore how real estate and marriage (and sometimes divorce) go hand in hand.
Do you need extra support during a separation or other sensitive transaction? Our detailed seller’s checklist can help you stay on track. Download your copy right here.
Matrimonial Home Rights, Ontario
The simple answer is yes, a partner does have a right to a matrimonial home owned by one spouse in Ontario. What is a matrimonial home? This is the property that a married couple shares at the time of separation.
Every province has its own rules regarding marital law, but Ontario’s Family Law Act is notably strict in that the full value of the property is included in the distribution of assets. This is true even if one spouse owned it before you even met.
How does this situation play out and what happens to the mortgage in the event of a divorce? Imagine you own a home worth $700,000 and still have $200,000 to go in terms of your payments.
- You and your spouse decide to separate and sell the house.
- After the transaction, the mortgage will be paid off in full, including any penalties.
- The remaining funds are added to the marital assets and equalized between both spouses.
Any house that the couple shares is considered the matrimonial home, whether you purchased it outright and even if you inherited it before your marriage. To some people, the law seems unfair, but it is the law, nevertheless.
The only way around it could potentially be through a marriage contract; however, that is beyond the scope of this post. To learn more about how you can protect your financial assets while remaining fair to your partner, we recommend sitting down with an experienced family attorney.
Real estate isn’t always simple. Check out the posts below for information on specific challenges you may be facing:
- How to Sell a House When One Partner Refuses in Ontario
- Can You Avoid a Power of Sale of Your Home?
- How To Make Selling a Home Easier During a Divorce
Division of Assets in Divorce
The matrimonial home is in a class by itself when it comes to real estate and marital law. The division of other assets follows a different set of rules and raises another set of questions. What if one spouse owned a house before marriage, but it’s not the matrimonial home? Examples could include a cottage that was inherited by a family member or an income property that you invested in before you took your vows.
Technically speaking, the other spouse does not have a right to the portion of any asset or any equity you had in it before marriage. Where it gets complicated is that some assets fluctuate in monetary value. Let’s take a look at this hypothetical scenario.
You bought a house prior to getting married and lived in it while you were single. Upon your marriage, you decided to keep the house but rent it out. Since you never lived there as a couple, it is not the matrimonial home. The original purchase price was $500,000.
10 years later, you and your partner separate. The house that you owned before has now grown in value to $700,000, an increase of $200,000. Your former spouse has no claim on the original $500,000; however, they are entitled to half of the growth in property value from the date you got married until your official separation.
Inherited Property and Divorce
Inherited property is where it can get really confusing. Your spouse’s entitlement to it depends on whether you received the title before or during your marriage.
If you inherited a home before marriage (that was not the matrimonial home, of course), the original value is yours free and clear, while the appreciation of the asset is split in a divorce.
If you inherit a home while married, the rules are different. The entire property value and its appreciation are yours alone, but there is a caveat. You must keep this asset entirely separate, with no joint usage (such as rental payments) between you and your spouse. In addition, you need to be able to provide a clear paper trail that documents the date and value of the inheritance.
Preparing a home during a separation can be the toughest part of the selling process. The posts below can help:
- Should You Renovate or Sell Your House As-Is?
- Can You Stage Your Home Without Staging?
- Can You Sell Your Peterborough Home Remotely?
CMHC Spousal Buyout Program
Who gets the house in a divorce is one of the most hotly debated topics in real estate. It can also be one of the biggest sources of conflict during the separation. That said, an amicable decision is always ideal whenever possible.
A divorce or separation is particularly hard on young children, especially if they must leave the only place they have ever known as home. Deciding who gets the house in a divorce with children can be particularly difficult. The obvious solution is for one partner to buy the other out. However, finances are a challenging obstacle for many divorcing couples.
The CMHC Spousal Buyout Program allows refinancing the mortgage for up to 95% of the property value, which can make it easier for one owner to buy out the other spouse. The home must be the primary residence, and both spouses typically need to be on the title to use the program.
In addition, the spouse who is taking over the mortgage must be able to qualify based on their income and debt ratio. This path may not be feasible in every situation, but it can help ease the burden on the family during a difficult time. An experienced real estate agent can help you understand all of your options so you can move forward to the next step in your journey.
Do you want customized guidance and advice for your situation? Our compassionate Peterborough real estate agents are standing by. Reach out to team@jeffandkatie.ca or call 705-243-9797 to start the conversation today.
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