“Divorce Monday” is typically when legal separation proceedings skyrocket — but financial pressures may keep more partners together

While some couples make it through the festivities, the new year often sparks reflection. For those who’ve endured a tough year, January feels like a fresh start — and for some, that means filing for divorce.

But financial realities are making divorce more complicated than ever. With soaring mortgage interest rates and favourable terms locked in during previous years, separating isn’t always feasible.

The cost of splitting up

Dividing marital home equity can feel especially overwhelming when today’s mortgage rates are much higher than in the past. In 2020, the posted rate for a 5-year fixed mortgage rate was around 4.9%. Today, that rate has climbed significantly to 6.09% (2).

For example: A couple with a $400,000 mortgage at a 5-year fixed rate of 4.9% in 2020 would pay $2,302 in principal and interest each month. If one spouse needs to refinance at the current average rate of 6.09% that payment jumps to $2,715.36 — an 18% increase of $414 monthly.

When one spouse needs to refinance during a divorce buyout, higher interest rates significantly increase housing costs. This is the main factor for why many Canadians struggle with home equity divisions.

To make matters worse, most couples sign their mortgage together, making both parties jointly responsible for 100% of the debt (3) — not just “their half.” Donna Cates, a certified divorce financial analyst, explained that in an email to Forbes that if the spouse staying in the house fails to make a payment, the other is legally obligated to cover the full amount, regardless of their relationship status (4).

Is there a way around it?

Divorce doesn’t have to mean giving up on homeownership, but navigating the financial fallout can be tricky. Selling the marital home and splitting the proceeds is often the simplest solution. However, it means losing the low-interest mortgage you may have locked in years ago.