Buying out a co-owner in Canada: lending rules and transfer tax
For banks, refinancing to fund a buyout cannot take total mortgage debt above 80% of the home's value unless insured or otherwise exempt. Ontario: unless an exemption applies, land transfer tax applies to transfers between spouses or former spouses, based on the value of the consideration. BC: when part of a property transfers, property transfer tax is based on the fair market value of the share transferred.
- Rules verified: 2026-07-13
- Sources fetched: 2026-11-04 (Bank Act s.418, Guideline B-20, minimum qualifying rate, straight-switch exemption, Ontario land transfer tax between spouses, BC property transfer tax)
- Lending rules: banks and federally regulated lenders only; transfer-tax rules: Ontario and BC only
- Educational only — not advice, not a lender decision
- The Mortgage Beast is not a brokerage; calculations on this site run client-side
When a refinance funds a buyout
For banks, refinancing to fund a buyout cannot take total mortgage debt above 80% of the home's value unless insured or otherwise exempt. (Bank Act s.418)
For federally regulated lenders, the lender must recalculate loan-to-value on any refinancing and document the refinance and its purpose. (Guideline B-20)
The mortgage stress test
For federally regulated lenders, an uninsured refinance faces the stress test: the greater of contract plus 2% or 5.25%. The straight-switch exemption does not apply when the loan amount rises or equity is taken out. (minimum qualifying rate; straight-switch exemption)
Ontario land transfer tax between spouses
Ontario: unless an exemption applies, land transfer tax applies to transfers between spouses or former spouses, based on the value of the consideration. (Ontario)
Ontario: a transfer between spouses or former spouses is exempt in three situations. The only consideration is taking over a registered mortgage; the transfer follows a written separation agreement; or it follows a court order. (Ontario, Regulation 696)
Ontario: "spouse" includes married partners, and unmarried partners who have lived together 3+ years or who have a child together and are in a relationship of some permanence. (Ontario)
BC property transfer tax on a partial share
BC: when part of a property transfers, property transfer tax is based on the fair market value of the share transferred. BC's own example: a 50% share of a $500,000 property is taxed on $250,000. (BC calculation examples)
BC: transferring a principal residence, or a partial interest in one, to a "related individual" may be fully or partly exempt. Conditions include 6 months' continuous residence and Canadian citizenship or permanent residence. (BC principal residence exemption)
BC: if part of the share comes from someone who isn't a related individual, tax applies to that part. (BC principal residence exemption, Example 3)
What this page does not cover
The lending rules and the provincial transfer-tax rules above are separate facts. This page does not decide how a lender classifies a co-owner buyout, and it does not cover provinces other than Ontario and BC. We are not a brokerage (how we're paid); mortgage calculations on this site run client-side.
Related
Frequently asked questions
What limits apply when a refinance funds a co-owner buyout?
For banks, refinancing to fund a buyout cannot take total mortgage debt above 80% of the home's value unless insured or otherwise exempt. For federally regulated lenders, the lender must recalculate loan-to-value on any refinancing and document the refinance and its purpose.
Does the mortgage stress test apply to a refinance that funds a buyout?
For federally regulated lenders, an uninsured refinance faces the stress test: the greater of contract plus 2% or 5.25%. The straight-switch exemption does not apply when the loan amount rises or equity is taken out.
Is there Ontario land transfer tax when a spouse buys out a spouse?
Ontario: unless an exemption applies, land transfer tax applies to transfers between spouses or former spouses, based on the value of the consideration. Ontario: a transfer between spouses or former spouses is exempt in three situations. The only consideration is taking over a registered mortgage; the transfer follows a written separation agreement; or it follows a court order.
Who counts as a spouse for Ontario land transfer tax?
Ontario: "spouse" includes married partners, and unmarried partners who have lived together 3+ years or who have a child together and are in a relationship of some permanence.
How is BC property transfer tax worked out on a partial share?
BC: when part of a property transfers, property transfer tax is based on the fair market value of the share transferred. BC's own example: a 50% share of a $500,000 property is taxed on $250,000.
Is there a BC exemption when a share of a principal residence transfers?
BC: transferring a principal residence, or a partial interest in one, to a "related individual" may be fully or partly exempt. Conditions include 6 months' continuous residence and Canadian citizenship or permanent residence. BC: if part of the share comes from someone who isn't a related individual, tax applies to that part.