Mortgage Advice to Help You Through a Separation

Tim Lyon • January 11, 2024

With the latest stats claiming that about half of marriages end in divorce and with around three-quarters of Canadians being homeowners, it’s important to know how to handle your mortgage if you decide to separate. Here’s a quick list of things to consider.


Keep making your payments.


A mortgage is a legally binding contract between you and the lender. It doesn’t take marriage into account. If your name appears on the mortgage, you're responsible for making sure the regular payments are made. A marital breakdown does not give you an excuse not to make your mortgage payments.


If, during your marriage, you've relied on your spouse to make the mortgage payments and you aren’t certain payments are being made after separating, it's in your best interest to contact the lender directly to verify your mortgage is being paid. If payments aren't being made, it could affect your credit score or worse; the lender could start foreclosure proceedings.


There is always a financial cost to break your mortgage.


When working through how to split your finances, you decided to either refinance your mortgage, remove someone from the title, or sell the property, keep in mind that you will incur legal costs.


If you’re in the middle of a term, the penalty for breaking your mortgage might be significant, especially if you have a fixed-rate mortgage. It’s certainly worth contacting your mortgage lender directly to verify the cost of breaking your mortgage. Having that information accessible when writing out your separation agreement will provide increased clarity.


Listing your marital status as separated or divorced.


When completing a mortgage application for securing new mortgage financing, when you list your marital status as separated or divorced, you can expect that a lender will want to see your legal separation agreement or your divorce papers. The lender wants to make sure you aren’t responsible for support payments. So if you haven’t finalized the paperwork, expect delays in securing mortgage financing. 


It could be harder to qualify for a new mortgage.


With the separation of assets also comes the separation of incomes. If you qualified for your existing mortgage on a double income, you might find it hard to maintain the same quality of lifestyle post-separation.


This is where careful planning comes in. Working closely with your independent mortgage professional will ensure you understand exactly where you stand. You’ll want to put together a plan for how to handle the mortgage on the matrimonial home.


Purchasing the matrimonial home from your ex.


There are special considerations given to people going through a separation to buy out the matrimonial home. Instead of looking at the transaction like a refinance where you can only borrow up to 80% of the property’s value, lenders will consider one spouse buying out the other up to a 95% loan to value ratio. This comes in handy when dividing assets and liabilities.


Navigating the ins and outs of mortgage financing isn’t something you have to do alone. If you're going through a separation and you’d like to discuss all your mortgage options, please connect anytime. It would be a pleasure to walk you through the process.

Tim Lyon

Mortgage Consultant

How Mortgage Rates Work: Fixed vs. Variable

By Tim Lyon • September 26, 2025
What affects mortgage rates? Does the Bank of Canada rate affect fixed-rate mortgages? These are questions that come up all the time, so in this this post, I’ll explain how fixed and variable rates are determined, why they don’t always move together, and what that means for you as a borrower. But to start with the short answer: While Bank of Canada announcements immediately impact variable rates, fixed rates usually have those expectations already baked in long before the announcement. That’s because fixed rates are forward-looking — they reflect where markets think rates are headed, not just where they are today. What Are Fixed and Variable Rates? Fixed Rate The interest rate stays the same for the entire mortgage term. Payments remain consistent, no matter what happens in the market. Variable Rate The interest rate changes during the mortgage term, moving up or down depending on the lender’s prime rate. Payments may stay the same (VRM) or change (ARM). How Do Fixed Rates Work? When you choose a fixed rate, the lender is guaranteeing your rate for the length of your term . To do this, they need to estimate what a fair rate will be over that time. This makes fixed rates more forward-looking — they often reflect not just today’s conditions, but also what the market expects to happen in the future. Key Points About Fixed Rates Strongly influenced by the Canadian bond market (especially the 5-year government bond yield). Lenders adjust their fixed rates based on investor expectations for inflation and future interest rates. Often, Bank of Canada moves are already baked into fixed rates before they happen. Example If bond yields suggest that rates will rise in the next year, lenders may increase fixed rates now, even if the Bank of Canada hasn’t made a move yet. How Do Variable Rates Work? Variable rates move directly with the Bank of Canada’s overnight rate. When the Bank of Canada raises or lowers its rate, lenders adjust their prime rate accordingly, and variable mortgages follow. For borrowers, the most important detail is the discount from prime , because that sets the actual rate you pay. For example, if prime is 4.95% and your mortgage is Prime – 0.5%, your rate is 4.45%. The discounts lenders offer change over time. In periods of economic uncertainty, lenders usually shrink the discount they offer, which can make new variable mortgages less attractive even if prime is coming down. Key Points About Variable Rates Directly tied to the Bank of Canada’s overnight rate, which is reviewed eight times a year. Banks adjust their prime rate in response to these moves. Your actual rate = Prime – discount (e.g., Prime – 0.5%). Example If prime is 4.95% and your mortgage is Prime – 0.5%, your rate is 4.45%. If the Bank of Canada cuts rates by 0.25%, prime drops to 4.70%, and your rate automatically drops to 4.20%. Why Don’t Fixed and Variable Always Move Together? Fixed rates reflect the bond market, which looks ahead at where rates and inflation may go. Variable rates respond directly to Bank of Canada decisions, reflecting current conditions. This is why fixed rates can fall while variable rates stay flat, or vice versa. Next Steps If you’re deciding between fixed and variable, understanding how each is set is the first step. The next is to match the right mortgage type to your budget and comfort with risk. If you’d like to review which option works best for you, I’d be happy to help. Need help with your mortgage? Book a consultation or call 778-988-8409 . Mortgage Term Glossary Amortization: The total length of time it will take to pay off your mortgage completely (typically 25–30 years in Canada). Bond Yield: The return investors get from government bonds. Used as a benchmark for fixed mortgage rates. Discount (Variable Rate): The amount subtracted from prime to determine your actual mortgage rate. Fixed Rate: An interest rate that stays the same for the entire mortgage term. Mortgage Term: The length of your mortgage contract with your lender (typically 1–5 years), after which you need to renew. Overnight Rate: The interest rate at which major banks borrow and lend money to each other, set by the Bank of Canada. Prime Rate: The interest rate banks use as a baseline for loans, influenced by the Bank of Canada’s overnight rate. Variable Rate: An interest rate that changes during your mortgage term based on lender prime rates.

Fixed vs. Variable Mortgages: Which is Right for You?

By Tim Lyon • September 25, 2025
When arranging a mortgage, one of the first decisions you’ll need to make is whether to go with a fixed or variable rate. Both options have their own benefits and challenges, and understanding the differences will help you choose the one that fits your financial situation best. In this post, we’ll break down the differences between fixed and variable mortgages, how they’re priced, the pros and cons of each, and what you should consider before making a decision. What are Fixed and Variable Mortgages? Fixed Rate Mortgage: Your interest rate stays the same for the entire mortgage term. That means your monthly payments won’t change, making budgeting more predictable. Variable Rate Mortgage: Your interest rate changes during the term. There are two main types: Variable Rate Mortgage (VRM): Your payment amount stays the same, but how much goes toward principal vs. interest changes as rates move. Adjustable Rate Mortgage (ARM): Your payment amount itself changes when rates move. How Do Fixed and Variable Mortgages Work? Fixed Your rate is set when you sign your mortgage contract. Payments remain consistent, regardless of whether interest rates rise or fall. Fixed rates are heavily influenced by the Canadian 5-year bond yield. Variable Your rate is tied to your lender’s prime rate, which follows the Bank of Canada’s overnight lending rate (reviewed 8 times a year). Lenders usually offer a discount from prime, such as Prime – 0.4% . You can often lock into a fixed rate at any time (though usually for a term equal to or longer than what’s left on your mortgage). Penalties for Breaking Your Mortgage Fixed The greater of three months’ interest or the Interest Rate Differential (IRD). IRD can be very costly if rates have dropped since you signed. Variable Always three months’ interest — simpler and usually less expensive. Pros and Cons Fixed Rate Pros: Predictable payments, easier budgeting Protection if rates rise Currently about 1% lower than variable, meaning you may qualify for more Fixed Rate Cons: More penalty risk if you break the mortgage early You miss out if rates fall Variable Rate Pros: Benefit if rates decrease Less penalty risk(3 months’ interest) Option to lock into fixed at any time Variable Rate Cons: Payments (ARM) or interest portion (VRM) can rise if rates go up Less predictable for budgeting Lock-in rates may not always be the best available  Quick Summary • Fixed mortgages = stable, predictable, tied to bond yields, but more penalty risk. • Variable mortgages = tied to Bank of Canada, potential savings, lower penalty risk, but less predictable. • VRM vs. ARM = VRM keeps payments steady while ARM adjusts payments with rates. Next Steps Choosing between fixed and variable depends on your risk tolerance, financial goals, and comfort with rate changes. If you’re unsure which option is right for you, let’s talk about your situation and find the best fit. Need help with your mortgage? Book a consultation or call 778-988-8409 . Mortgage Term Glossary Adjustable Rate Mortgage (ARM): A variable mortgage where payments increase or decrease as rates change. Amortization: The total length of time it will take to pay off your mortgage completely (typically 25–30 years in Canada). Bond Yield: The return investors get from government bonds. Used as a benchmark for fixed mortgage rates. Down Payment: The upfront amount you pay toward the purchase price of a home, expressed as a percentage of the total price. Equity: The difference between what your home is worth and what you owe on your mortgage. Fixed Rate: An interest rate that stays the same for the entire mortgage term. Interest Rate Differential (IRD): A penalty calculation for breaking a fixed mortgage when current rates are lower than your original rate. Lock-In: The option to switch from a variable mortgage to a fixed mortgage during your term. Mortgage Term: The length of your mortgage contract with your lender (typically 1–5 years), after which you need to renew. Prime Rate: The interest rate banks use as a baseline for loans, influenced by the Bank of Canada’s overnight rate. Variable Rate Mortgage (VRM): A variable mortgage where payments stay the same, but the principal vs. interest split changes with rate moves. Variable Rate: An interest rate that changes during your mortgage term based on lender prime rates.