Divorce rates in Canada have been declining since 1990, and Statistics Canada has reported that in 2020, the rate hit a decade’s low rate of 5.5 couples per 1000. This is good news for Canadian families and one of the lowest rates in the G7 group of countries. Note that the decline in divorce rates does not include all couples that are splitting up.
Common-law couples in Canada account for over 1 in 5 couples who live together, and this is not captured in divorce rates that are measured. However, common-law couples can be subject to many of the same laws regarding separation as married couples.
Most marriages involve a matrimonial home; some also have rental properties and cottages to consider in a separation agreement. (yes, cottages can be considered a second matrimonial home if used consistently over time as a family cottage). Most of the time, the sale of the family home or homes is part of the financial reconciliation required to separate the married couple. The family home will have to be sold if neither of you can afford the home on your own or if neither of you wants to keep the home.
Realtors® are often the first people to know that a separation is happening as couples seek to understand the equity they have in the home, or homes, and how it may be divided. Sometimes equity is calculated as a matrimonial home, and other times, it is calculated as an asset (as in the case of rental properties).
Expert Advice Is Essential.
The decision to keep or sell the house can be a challenge. Dealing with a divorce is already a difficult process. Even if you and your spouse are on amicable terms, there are a lot of heavy emotions involved – not to mention the legal and financial factors. Add a home sale on top of all that, and things can get overwhelming in a hurry.
The Weeks Group, as long-standing Barrie Real Estate Agents, have helped people for decades to make decisions in separations that are not based on emotions or misinformation. This is not to say that you should ignore all emotional factors, but rather that you make decisions based on facts. You will likely need assistance from the following professionals:
- Experienced Realtor®
- Experienced Lawyer or Mediator
- Experienced Accountant (possibly)
- Experienced Mortgage Agent
Looking for more advice on how to sell your house in any market? The following resources will help:
- Download Our Seller’s Guide
- What Is Your Home Worth? Book Your Free Evaluation
- Should You Stage Your Home Before Selling?
Understanding Your Finances
Your home is likely your most valuable asset. If one spouse is emotionally attached to the home or wants to stay for the sake of the kids, can they afford to keep it and buy the other spouse out? An experienced Realtor® can evaluate the home’s current equity and help you understand how it will impact your decision. Here are a few financial factors to consider:
Your Remaining Mortgage
Call an experienced mortgage professional about your mortgage and evaluate what might happen if one spouse keeps the home. It’s time to ask some of the hard questions.
- Can you qualify to assume the mortgage, and will the bank allow that?
- Is there a penalty?
- Can you afford the payments on your own?
- Can you afford utilities and maintenance?
If you don’t re-qualify, you might consider finding someone to co-sign the mortgage, such as your parents. Having a fallback like this becomes even more important if you want the kids to stay in the house. If it’s just you and you don’t re-qualify, maybe it’s a sign you really can’t afford the home. It might make more sense to sell.
The Cost of Selling vs. Staying
Compare the costs associated with selling (real estate fees, legal fees, mortgage penalties, tax implications) versus maintaining the property. For example:
- Is there a penalty for breaking the mortgage?
- Can it be ported to another property if the interest rate is worth the costs involved for at least one purchase?
- Do you qualify for the new mortgage by yourself?
There may be negative tax consequences with respect to capital gains if you and your spouse are not careful with respect to your post-separation living arrangements. An experienced divorce lawyer can offer legal guidance and document your agreement to preserve the principal residence exemption.
The Sentimental Value of Home
Your home is likely the centre of your life and your children’s lives, and it may be the source of many memories and deep emotional ties. The neighbourhood may be one that you have a deep attachment with. Evaluating the prospect of moving to a new neighbourhood will be assisted by discussing the options with a good local Realtor® who will be familiar with the pros and cons of different locations and the fit for you in this new chapter of your life.
Buying and selling a home can be stressful on its own. The Weeks Group works hard to make it seamless, but if you are in the middle of a marital separation, it can get a lot more complicated. Finding an experienced and caring Realtor® is essential to help manage the journey of separation to the best outcome possible.
Sentimental Value can work both ways. Memories of living in the home with your family can be a comfort and familiar feeling in a neighbourhood you know helps to carry you forward, or it can be a painful burden to continue to reside in the home.
The children may tell you that they don’t want to move. Children’s stability is an important factor. There are many factors to consider with the kids, including age and availability of alternative housing to keep them in the same school and with the same group of friends. A lot of self-reflection needs to take place for both parties to assess if both are emotionally prepared to let go of the house.
Legal Implications of Selling a Matrimonial Home
Get a separation agreement in place prior to putting the home on the market. Without a separation agreement, finalizing the sale of a home can present unique challenges. Although the house can be listed and sold with the written consent of both spouses, the distribution of funds after the conveyance of the real estate cannot happen without a formal written separation agreement to guide the banks and lawyers.
Let’s define what a matrimonial house is. There must be no confusion. Legally speaking, it is a property ordinarily occupied and owned by the spouses (one or both can be the owners) on the day of separation. That also means that you can have more than one house as your matrimonial home, and you should consider that this kind of property will always be divided 50/50 between the spouses.
Yes, there are some exemptions, but mostly, all the matrimonial houses will be divided equally under Ontario law. Both spouses have equal rights and ownership over their home regardless of who covered the most mortgage payments or even if one partner owned the house before you got together. As a shared asset, the property is known as the Matrimonial Home.
Without a separation agreement, the lawyer must hold the funds in trust. This could have implications for the purchase of another home for either or both parties, as funds could be held for months. Not all couples decide to divide the proceeds of the sale of the matrimonial home equally, and one spouse may only be receiving a portion of the net proceeds.
It is possible to get a pre-approval letter from a bank for a mortgage but again, without a separation agreement the bank will not release funds if you buy a home too soon.
Prenuptial and Postnups
There may be differences in asset distribution stemming from mutually agreed and signed agreements that will require a lawyer to assess for impact to the situation. The court can grant an order on exclusive possession to any party in the divorce process.
It will mean that you or your spouse can live in the given house during the divorce process regardless of your ownership status. It is a temporary order, and it does not give you or your spouse a right to sell a house on your own without mutual agreement and signatures.
Practical Steps If You Decide to Sell
Your chosen Realtor® is going to play a very key role in the process of selling your matrimonial home and finding and securing new homes for the separated couple and family. Choose carefully. Choose experience and care. Communication is key.
The Weeks Group has flexible communication strategies that we use depending on the circumstances involved in each case. If it is an amicable separation, then meetings can take place together. However, if the emotions are raw, we can decide on another strategy where the content is common to both sides but delivered separately, either by one member of our Realtor Group or you may decide to use two members.
Assessing the Current Value
Your home has likely appreciated in value since the time you bought it. Both parties must agree on a buyout price that reflects the current market with a full analysis of the current market pricing opportunity. As you might imagine, reaching a mutual agreement on this isn’t always easy.
However, by working with a trustworthy, unbiased real estate agent, you and your partner can come together on an informed decision that respects the interests of both parties. If neither you nor your spouse want to keep the home, selling it together and splitting the proceeds may be the best option. This route provides a clean break and allows each partner to start the next chapter of their lives with a strong return in their pocket.
While this process can be pretty straightforward, there will once again be a lot of key details you’ll need to see eye to eye on, such as:
- Which agent you work with
- Your selling price
- The timeline of the sale
Who will handle the workload that can come with selling
If you decide you want to buy out the mortgage from your partner and stay in the home, this will require financial obligations and determining whether or not you can afford the mortgage payments on your own. One of the other considerations here is to understand what other monies you might be due, such as spousal or child support or additional asset proceeds, that might help make the payments manageable and aid in qualification.
Tips for Maximizing Your Sale
In preparing the home for sale, there may be recommendations to help maximize your return on the sale, such as:
- Staging
- Necessary repairs
- How to make the home market-ready
A clear coordinated plan needs to be made and clearly communicated with responsibilities agreed upon.
Should you settle in Barrie after your divorce is finalized? The posts below can help you decide:
Your Next Steps
You don’t have to bear this burden alone. You need seasoned professionals on your side. Professionals with integrity that keep your best interests in the forefront of all decisions and actions. We have handled many separations and can sincerely say that they all had very satisfied results in the end.
The Weeks Group is here for you throughout this journey. Reach out today to hello@weeksgroup.ca or call 705.305.4174 to learn more about how we can support you.
We’re In Your Corner
Get advice about buying or selling, relocating, or building your dream home from our local market experts.
