Buying a home is the biggest financial decision most Canadian couples make together. And for couples with a prenup, the interaction between their marriage contract and their mortgage application raises important questions. Does the lender care about your prenup? Does your prenup affect your property title? And how do you protect a home you buy together when your prenup keeps certain assets separate?
Here’s what you need to know.
Do Mortgage Lenders Care About Your Prenup?
In most cases, Canadian mortgage lenders don’t ask about your prenup during the application process. Lenders evaluate your application based on income, credit score, existing debt, down payment, and the property’s appraised value. Your marriage contract is a family law document, not a banking document.
However, your prenup can indirectly affect your mortgage in several ways. If one partner is providing the entire down payment from separate funds, the lender may still require both partners to be on the mortgage if both are on the title.
The most important thing is to understand the difference between the mortgage (who owes the bank) and the title (who owns the property). Your prenup governs ownership and division. The mortgage governs the debt. These are separate legal arrangements, and they don’t always align.
Title, Ownership, and Your Prenup
When you buy a home together, you decide how to hold title. In Ontario, the two most common options are joint tenancy (both partners own the property equally with a right of survivorship) and tenancy in common (each partner owns a specified share, which can be unequal).
Your prenup can specify ownership percentages that differ from the title registration. For example, if one partner contributes 80% of the down payment, the prenup might specify that they retain that proportional share of the equity, even if the title is held as joint tenants. Without a prenup, the default equalization rules apply, and the title registration doesn’t necessarily determine who gets what.
The Matrimonial Home Trap (Again)
If you live in the home you purchase together, it becomes the matrimonial home under Ontario’s Family Law Act. The matrimonial home has special status: both spouses have an equal right to possession, and neither can sell or mortgage it without the other’s consent. Most importantly, the matrimonial home is not excluded from equalization, even if one partner owned it before the marriage or contributed more to the purchase.
A marriage contract can alter how the spouses will treat the value of a matrimonial home for property and equalization purposes. However, a marriage contract cannot limit the statutory rights that spouses have under Part II of Ontario’s Family Law Act in relation to the matrimonial home, including possessory rights. This is one of the most important clauses in any Ontario marriage contract.
Refinancing, Selling, and Your Prenup
What happens if you refinance the mortgage during the marriage? Or if you sell the home and buy a new one? Your prenup should be drafted to anticipate these scenarios. A well-written clause addresses not just the initial purchase but any subsequent transactions involving the property.
If you sell the matrimonial home and purchase a replacement, the new home typically becomes the new matrimonial home, with all the same legal implications. Your prenup should follow the home, not just apply to the specific property you owned at the time of signing.
Practical Tips for Homebuying Couples With a Prenup
Discuss your prenup with your real estate lawyer before closing. They can ensure the title registration aligns with your marriage contract’s intentions. Keep clear records of who contributed what to the down payment, especially if funds are coming from separate property. Update your prenup if your housing situation changes significantly (selling, refinancing, purchasing additional properties). And if you’re buying your first home, make sure you understand how the First Home Savings Account (FHSA) contributions are treated in your agreement.
Buying a home together? Make sure your prenup keeps up. Start at I Do Prenup.
Frequently Asked Questions
Q: Does a mortgage lender check if I have a prenup?
No. Lenders evaluate your application based on income, credit, and debt, not your marriage contract. However, your prenup can indirectly affect how income and assets are counted.
Q: Can my prenup override who’s on the mortgage?
No. The mortgage is a contract with the lender. Your prenup governs ownership and property division between spouses. These are separate legal arrangements.
Q: Should I tell my real estate lawyer about my prenup?
Absolutely. Your real estate lawyer should ensure the property title aligns with the intentions outlined in your marriage contract.