Deciding whether to sell or keep the matrimonial home can be one of the most emotionally charged and financially challenging decisions divorcing spouses will make. For the average couple, real estate is likely the largest joint asset, not to mention the emotional attachment that comes with it.
Under Ontario’s Family Law Act, each spouse is entitled to half of the equity accumulated during the marriage in the marital home. There are several options for dealing with the family home during a divorce — but generally, one spouse buys out the other, or the couple sells the house and divides the proceeds.
Keeping the home
In this scenario, the spouse who wants to keep the home will buy out the other’s share of the equity in the house. The party keeping the home will have to requalify for the mortgage on their own and prove to the lender that they can afford to make the payments.
Your financial institution may ask for certain information, including:
- a separation agreement
- the amount of any child support payments
- the amount of any spousal support payments
If you have qualified for the mortgage, you need to have your former partner removed from the home’s title and released from the mortgage — all of which have fees attached.
Minimize disruption for children
In my experience, there are a few reasons a spouse will want to hold onto the matrimonial home. If children are involved, one parent may want to stay in the house because it means fewer changes for the kids. By staying put, the children can attend the same school, keep the same friends, and experience less upheaval in their day-to-day lives.
That said, if one parent is keeping the house, the children may lean towards wanting to spend more time where things feel familiar. It’s not necessarily about the parent, it’s about the house. If you’re in a dispute over the children’s schedule, you may want to take that into account.
Perhaps one spouse has poured their heart and soul into renovating, decorating and gardening and has a strong attachment to the home. The family home can also be nostalgic and holds memories of better times, which can be easy to latch on to during such a tumultuous time.
Will keeping the home cause financial strain?
I would caution against keeping the home if it will cause financial strain. Remember, you might be able to afford to buy out your spouse in the settlement, but you also have to consider the carrying costs moving forward.
Maintaining a home on your own is more expensive than sharing the costs. Can you really afford the upkeep and maintenance of the home, or are you going to be house poor? If you are determined to keep the matrimonial home, I strongly recommend speaking with a financial advisor to determine if this option is realistic and sustainable for you.
Selling the home
Even if one party can easily afford to keep the marital home, there’s something to be said for having a clean break. I know of one very experienced family law judge who frequently advises spouses to sell because he believes both parties should have a fresh start. Moving on can be much harder to do when one person is holding onto the family home.
For many couples, keeping the home is not an option because they both need the money from selling the house. Despite the pandemic, house prices in areas like Toronto and its surrounding suburbs have reached historic highs. As a result, splitting spouses may be anxious to sell and capitalize on the value of their property while the market is still hot.
Depending on when you purchased the house and the type of mortgage, you may have to pay a prepayment penalty to your lender. Breaking your mortgage contract could cost you up to tens of thousands of dollars, Global News reports. If you have a fixed-rate mortgage, look into how your financial institution calculates penalties.
Getting creative
During divorce proceedings, dealing with the matrimonial home is not always as cut and dried as keeping or selling the house.
If proceedings are amicable, spouses might agree to creative forms of the buyout. For example, a recent article in Moneysense suggests that if one party wants to stay in the home, they might consider giving up a larger share of investment assets or pensions in return.
Sometimes lump sum spousal support can be factored into the buyout. For example, a wife wants to buy her husband out and uses the large payment towards buying him out as part of the settlement.
If it’s important to both parties that the children stay in the same school, one spouse may buy out the other at a cheaper rate with a stipulation in the separation agreement that the kids stay in the home until they finish high school.
Of all the assets a married couple will share, the matrimonial home is one loaded with emotional attachment and sentimentality, which is why parties may want to fight tooth and nail to keep it. I have seen instances over the years where it was so important for a spouse to keep the house that they now struggle to afford to maintain.
No matter what choice you make, it is crucial to consider the long-term financial implications and realize that sometimes it’s better to let go than to hold on.
