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My situation is this: My sister and her husband have accumulated a large mortgage. He has left her and, under their separation agreement, will walk away from the house. Once his name is removed from the title, my sister won’t be able to make the payments on her own nor qualify for the mortgage by herself. She refuses to sell the house and has asked our elderly father to co-sign. I worry he will feel pressured to agree. If my sister can’t afford the payments after he co-signs, will our father be required to pay? And when Dad dies, will my sister’s entire mortgage (now half his responsibility) automatically come out of his estate? He would have enough in his estate to pay off the mortgage. Or would she simply need a new co-signer?
—Filipa
What happens to a mortgage during separation and divorce
Thanks for your questions, Filipa. If your father co-signs the mortgage and your sister can’t make the payments, your father would be legally responsible to make them. If neither party pays, the loan could go into default. There’s more to consider, though.
Below we’ll explain what typically happens to a mortgage during a divorce, what co-signing entails and the responsibilities and risks for a co-signer, and we’ll outline alternatives your sister might consider.
Divorce is stressful and often affects extended family, especially when the family home is involved. When a couple separates, they divide assets and liabilities that were accumulated during the relationship. Joint bank accounts, shared debts and the family home are all part of that process. For many Canadians the family home is the largest single asset.
Spouses who share a mortgage generally face two main options:
- One spouse keeps the home and assumes responsibility for the full mortgage, while buying out the other spouse’s share.
- They sell the home, pay off the mortgage and divide any remaining proceeds.
If the sale proceeds don’t fully cover the mortgage, both spouses remain liable to the lender for the shortfall unless arrangements are made to release one party.
If one spouse keeps the house, that person typically must pay the other spouse their share of the equity, either by assuming the mortgage or refinancing.
How a spouse can assume the mortgage after divorce
There are two common ways a spouse can remain in the home and handle the mortgage on their own.
1. Assuming the mortgage
Assuming the mortgage means one partner takes full responsibility for the existing loan. This requires paperwork to release the other spouse from liability, such as a release of covenant and transfer of ownership. The spouse assuming the mortgage often must be able to buy out the departing partner’s share using other funds. Many people cannot afford that option without a significant income or savings.
2. Refinancing the mortgage
Refinancing is the more common option. The remaining homeowner takes out a new mortgage to pay off the existing loan plus the buyout amount owed to the ex-spouse. Refinancing can offer more flexibility—such as extending amortization to lower monthly payments—but the person keeping the house still needs to qualify for the new mortgage on their own. If they cannot, they may consider a co-signer.
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What does it mean to co-sign a mortgage?
Terms like co-signer, guarantor and joint mortgage are often used interchangeably but have different legal implications.
Co-signer
A co-signer is added to both the mortgage and the title. That gives the lender more assurance the loan will be repaid because the co-signer is an owner and is fully liable for payments.
Guarantor
A guarantor is added only to the mortgage, not to the title. They guarantee payments, so if the borrower defaults the lender can pursue the guarantor, even though the guarantor isn’t an owner of the property.
Joint mortgage
A joint mortgage involves two or more people listed on the loan. All signatories share legal responsibility for repaying the mortgage regardless of how ownership is split.
Responsibilities and risks of co-signing a mortgage
Before your father agrees to co-sign, Filipa, he should fully understand the responsibilities and potential risks.
Ownership implications
If your father co-signs, he will be on the title and legally own a portion of the property. Ownership shares can be unequal—70/30, 60/40 or another split—but even a minority share does not protect him from mortgage liability.
Who is responsible for payments?
Both signatories are responsible for the mortgage. If your sister cannot make payments, the lender will expect your father to cover them. If the lender must pursue a delinquent loan, both parties’ assets and income can be at risk.
Credit score and debt ratios
Co-signing affects credit. Missed or late payments on the mortgage will appear on your father’s credit report and can damage his score. The co-signed mortgage also counts toward his gross debt service and total debt service ratios, which could limit his ability to qualify for future loans.
Estate and long-term implications
Co-signing creates estate considerations. The co-signer assumes the risks of property ownership, such as declines in market value or unexpected repair costs. If your father passes away and the property is held as joint tenancy, the surviving owner typically gains full ownership automatically. However, the mortgage liability does not disappear—the surviving owner must be able to cover payments or arrange refinancing or a new co-signer. The lender can still pursue unpaid balances against the estate if the legal structure or circumstances require it, so it’s important to get clear legal and financial advice based on the exact ownership type and local laws.
Alternatives for managing a mortgage after divorce
Divorce can be one of the most significant financial events a person faces. If your sister is stretched financially, selling the family home may be a healthier option than taking on an unsustainable mortgage or burdening your father.
Selling allows her to downsize into a more affordable home, freeing equity to pay debts and reduce monthly expenses. With high inflation and tight budgets, living within one’s means often matters more than holding onto a particular property.
Find debt relief after divorce
If a person needs help managing debt after divorce, professional credit counselling can be valuable. Certified non-profit credit counsellors can review options such as budgeting, debt consolidation, consumer proposals or other strategies tailored to the situation.
Contact a certified non-profit credit counsellor if you need confidential, non-judgmental guidance. These services can help you understand the best path forward and assess whether selling, refinancing, or finding a new co-signer is the right move.
Credit Canada is a non-profit credit counselling agency with decades of experience helping Canadians manage debt. Counselling is confidential and free of charge.
Read more about divorce and finances:
- Are spousal and child support payments taxable?
- How to make better financial decisions—without regret—in a crisis
- How capital gains tax on property is divided in a divorce
- Am I required to divide my pension with my ex?
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This article was prepared by a MoneySense content partner based on expertise in this subject. It is informational and not an advertisement or advertorial.