The client
A common-law couple in London separating after several years together, with one partner staying in the home and buying out the other’s share of the equity — a spousal buyout mortgage in substance, structured as a straightforward refinance.
The mortgage math here is the whole story this file tells: how the parties agreed to divide the equity, and everything else about the separation, was worked out between them and their own lawyers, and this file does not state or assert any rule about how that division should happen.
Home value
$560,000, London
Current appraised value
Existing mortgage
$310,000 balance
Held jointly before separation
Equity
$250,000
Split agreed between the parties and their own lawyers
Buyout owed
$125,000 to the departing partner
Reflects these parties’ own settlement, not a formula
Staying partner’s income
$8,900/month, solo
Previously a two-income household; now qualifying alone
Other debt
Car loan, $340/month
Property tax est. $410/mo; heat est. $150/mo
The problem
The staying partner now had to qualify alone for a refinance covering both the existing mortgage and the equity buyout — a materially larger loan than either partner had qualified for as part of a two-income household, on one income instead of two.
Solo, at the standard 25-year amortization
- ▸New mortgage: $310,000 existing balance + $125,000 buyout = $435,000
- ▸GDS at the qualifying rate: 40.8% — against CMHC’s 39% benchmark
- ▸TDS at the qualifying rate: 44.6% — both just over, at the standard amortization
The gap was small — less than two points on either ratio — but a decline is a decline. The fix did not require a smaller buyout or a change to what the parties had already agreed between themselves; it required a different amortization structure on the mortgage itself.
The numbers
This is an equity take-out refinance, uninsured, with no purchase involved — so no land transfer tax applies, and the entire question is whether the staying partner’s solo income supports the combined loan at a workable amortization.
| The buyout, structured as a refinance | Amount |
|---|---|
| Home value | $560,000 |
| Existing mortgage balance | $310,000 |
| Equity | $250,000 |
| Equity split agreed between the parties (50/50, their own settlement) | $125,000 to departing partner |
| New mortgage (existing balance + buyout) | $435,000 |
| Amortization | Qualifying payment | GDS | TDS |
|---|---|---|---|
| 25-year (standard) | $3,071 | 40.8% ✗ | 44.6% ✗ |
| 30-year (lender’s standard uninsured option) | $2,890 | 38.8% ✓ | 42.6% ✓ |
This 30-year option is the lender’s own standard uninsured amortization policy, unrestricted by borrower type — a different thing entirely from the insured mortgage’s 30-year amortization, which is limited to first-time buyers or new-construction homes and would not have been available here regardless of the buyout.
Stretching the amortization from 25 to 30 years lowers the qualifying payment from $3,071 to $2,890 — enough to bring GDS from 40.8% down to 38.8% and TDS from 44.6% down to 42.6%, clearing both benchmarks without changing the loan amount or the equity split at all.
The solution
An FSRA-licensed Ontario mortgage agent structured the buyout as a straightforward refinance and solved the qualifying gap on the mortgage structure itself, leaving the separation agreement entirely to the parties’ own lawyers.
First, confirmed the equity split and buyout figure were already settled. The separation agreement, prepared by the parties’ own lawyers, specified the $125,000 owed; the mortgage file simply financed that already-agreed number.
Second, tested the solo qualification at the standard amortization first, to see exactly how far short the file fell, rather than assuming a fix was needed before confirming one actually was.
Third, moved to the lender’s standard 30-year uninsured amortization once the 25-year test came in just over the caps, a policy several conventional lenders offer without restriction, distinct from the insured program’s first-time-buyer-only 30-year option.
The outcome
Refinanced at $435,000 on a 30-year amortization, the departing partner released from the mortgage and paid out in full, and title transferred to the staying partner alone. No purchase occurred, so no land transfer tax applied — the average mortgage payment in Canada context was useful mainly in reassuring the staying partner that a solo qualifying payment in this range was not unusual for the local market.
What to take from this file
- 01Keep the property-division specifics with the parties’ own lawyers. A mortgage file finances an already-agreed settlement; it does not need to, and should not, assert a rule about how equity gets divided.
- 02A buyout mortgage often means qualifying solo for a loan sized for two incomes. Test the solo qualification early, before assuming the buyout figure itself needs to change.
- 03A longer amortization is a real lever on a close-miss file. Moving from 25 to 30 years lowered the qualifying payment enough to clear both ratios here without touching the loan amount.
- 04The insured 30-year amortization and a lender’s standard uninsured 30-year option are not the same program. The insured version is restricted to first-time buyers and new builds; the uninsured version, where offered, is a broader lender policy.
- 05The approval math runs at the qualifying rate, not the contract rate. This file qualifies at 7.09% and pays at 5.09%.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸CMHC — CMHC Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸CMHC — CMHC Home Start — 30-year insured amortization: first-time buyers and new builds only.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸5.09% contract rate — rates move daily; not a quote.
- ▸the 50/50 equity split — these parties' own settlement, not a legal formula this file asserts.
- ▸30-year uninsured amortization availability — offering 30-year amortization on an uninsured mortgage is lender policy, not a program with published eligibility rules.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.