Guest post by Antonio Simoes, Barrister & Solicitor, Deer Lake Law Group
www.deerlakelaw.ca
If you are separating in British Columbia and you own a home together, the question of
who gets the house will likely be the most financially significant decision you make. It is
also the point where your legal situation and your mortgage collide; getting the sequence
wrong can be costly.
The Basic Rule: Equal Division
Under BC’s Family Law Act, the family home is family property and is subject to equal
division between spouses, regardless of whose name is on title or the mortgage. This
surprises many people. If the mortgage is only in one partner’s name, that partner does
not have a stronger legal claim to the home. The starting point is always 50/50.
The increase in value, during the relationship, of a home owned before the relationship
also counts as family property and is divided equally. So if one spouse owned the home
before the relationship began, the original value at the time the relationship started may
be excluded, but everything it gained in value during the relationship is shared. In
markets like Burnaby, Vancouver, Langley, and Surrey, where homes have doubled or
more in value over a long relationship, this can represent an enormous sum.
Can You Keep the House?
Yes, if you can afford to buy out your spouse’s share of the equity and qualify for a new
mortgage on your own. Those are two separate hurdles, and both must be cleared.
A Separation Agreement that says you keep the house does not transfer the mortgage.
Your ex-partner remains on the mortgage until you refinance and the lender formally
removes them. This only happens when you qualify as a sole borrower. Many people
discover at this stage that they cannot pass the federal stress test on a single income,
particularly if they are now paying child support or spousal support, which lenders treat
as a liability against your qualifying income.
If you cannot qualify at a major bank, that is not necessarily the end of the road.
Alternative and private lenders have different qualification criteria. Working with a
mortgage broker who understands post-separation refinancing can make all the
difference.
What Happens to the Mortgage in the Meantime?
Until the home is sold or refinanced into one name, both parties remain legally
responsible for the mortgage. Separation does not change your obligations to the lender.
If you have moved out and your ex-partner stops making payments, your credit is
affected and the lender can pursue you. This is one of the most overlooked financial
risks of a prolonged separation. Resolving the mortgage, through a buyout or a sale,
should happen as quickly as circumstances allow.
The Excluded Property Question
If you owned the home before the relationship, document its value at the start of the
relationship. An appraisal, a purchase contract, or other evidence of value can protect a
significant excluded property claim. Without documentation, it becomes a contested
factual dispute that can drag out negotiation or litigation considerably. In BC’s real
estate market, the difference between a well-documented and a poorly documented
excluded property argument can easily reach six figures.
Selling Instead
If neither party can qualify to keep the home, or neither wants it, the property is sold
and the net proceeds are divided. This sounds straightforward but rarely is. Fixed-rate
mortgage prepayment penalties in Canada can be substantial. For example: on a
$700,000 mortgage, an interest rate differential penalty can exceed $20,000. That cost
reduces the equity available for division and must be factored into any settlement. Who
lives in the home until it sells, who covers the ongoing mortgage and maintenance costs,
and what the listing timeline looks like are all negotiable terms that should be addressed
clearly in the Separation Agreement.
Start Both Conversations Early
The most common and most expensive mistake separating homeowners make in BC is
treating the legal process and the mortgage process as sequential rather than parallel.
People negotiate a legal outcome, sign a Separation Agreement, and then find out the
financing does not work. By then, they may have given up legal rights that cannot easily
be recovered.
A family lawyer and a mortgage broker working from the same timeline, before the
Agreement is signed, can help you understand what is actually achievable, structure
support arrangements that do not inadvertently disqualify you from refinancing, and
build a realistic path to resolving the single largest asset in the relationship.
If you are in the Greater Vancouver or Fraser Valley area and navigating these
questions, Deer Lake Law Group and Rima Zino Mortgages are available to help on both
sides of the equation.
Antonio Simoes is a senior family lawyer at Deer Lake Law Group, serving the
community since 2011, offering family law, estate planning, probate, immigration, and
business law. Consultations are available in person and virtually.
https://www.deerlakelaw.ca
This article is intended for general informational purposes only and does not
constitute legal or financial advice. Laws and mortgage rules are subject to change.
Please consult a qualified BC family lawyer and mortgage broker about your specific
situation.