I'm divorcing and need $200K to buy out my spouse's half of the house — should I raid my RRSP or take on a HELOC

So what’s Nadia’s best move? Let’s unpack this scenario in detail below.

Consider whether keeping the house is worth it

Before Nadia commits to buying Marc out, it's worth thoroughly scrutinizing whether she has to keep the family home at all. Is staying in the house the right call financially and personally — or does it just feel like the expected thing to do? For many people going through a divorce, a fresh start in a new home ends up being healthier, both emotionally and financially, than holding onto a house full of old associations.

Nadia should also exercise caution about overextending to keep a home, since whoever stays becomes solely responsible for its future repairs and upkeep. A common budgeting guideline is the '1% rule' — setting aside about 1% of a home's value annually for maintenance — though some experts consider that conservative and recommend budgeting closer to 3% to 5%. For a $700,000 home, that's a range of roughly $21,000 to $35,000 a year.

Selling the home outright is worth serious consideration, since it lets both spouses walk away with cash instead of one person carrying all the future cost and risk. But selling comes with its own costs, including real estate commissions and the expense of preparing a home for sale — and with borrowing costs still elevated compared to a few years ago, buying a replacement home could be pricier than expected. As of late July 2026, the Bank of Canada’s policy rate sits at 2.25% and the prime rate most variable products are priced against is 4.45%.

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Compare the true costs of a HELOC vs. withdrawing from an RRSP

While taking on a HELOC and a bigger monthly payment might feel like the scarier option, withdrawing from an RRSP to fund a buyout can end up costing more than it may seem.

An RRSP is fully taxed as ordinary income in the year it’s withdrawn, on top of a withholding tax the financial institution must deduct and remit to the Canada Revenue Agency (CRA) immediately. For residents outside Quebec, that withholding tax is 10% on withdrawals up to $5,000, 20% on withdrawals from $5,001 to $15,000, and 30% on anything over $15,000. A $200,000 buyout is well past that top threshold, so 30% would be withheld right away.

That withholding is only a prepayment, not the final bill. The entire withdrawal still gets added to Nadia’s taxable income for the year, and if it pushes her into a higher tax bracket, she could owe considerably more than what was withheld once she files her return the following spring.

She could also look into the Home Buyers’ Plan (HBP). Canadians going through a marriage or common-law breakdown can qualify to use the HBP even if they aren’t first-time buyers, as long as they’ve lived separate and apart from their spouse for at least 90 days. As of the 2024 federal budget, the HBP lets an eligible person withdraw up to $60,000 tax-free from an RRSP — including specifically to acquire a separated spouse’s interest in what was their shared home — as long as the funds are repaid to the RRSP over 15 years.

That means Nadia could use the HBP to access $60,000 of her buyout tax-free, leaving $140,000 to come from a fully taxable withdrawal. Because of the 30% withholding rate, she’d need to withdraw roughly $200,000 from her regular RRSP just to walk away with $140,000 in hand today.

That means a $200,000 buyout could require pulling roughly $260,000 out of her RRSP in total — $60,000 through the HBP plus $200,000 in a taxable withdrawal — money that would otherwise have kept growing for retirement. A HELOC, by contrast, doesn’t touch retirement savings at all, though it does add a variable-rate monthly payment.