If you are over 50, the arithmetic changes

Everything above applies whatever your age. Past 50, three things change at once, and they change together.

The house is usually the largest asset and the retirement plan at the same time. There are fewer working years left to recover from a decision that turns out wrong. And the question of whether you can carry the home alone stops being about willingness and becomes about whether a lender says yes.

This section covers the buyout math, qualifying for a mortgage close to retirement, and the real cost of downsizing.

The buyout math, and the program most people have never heard of

A standard refinance in Canada is capped at 80 percent of the home's appraised value. For most separating couples with a mortgage still outstanding, that ceiling is what forces a sale.

There is an exception built specifically for this situation. Where the refinance is to buy out a spouse on separation, the mortgage insurers allow financing up to 95 percent of the appraised value. It is structured as a purchase rather than a refinance, and that extra 15 percent of borrowing room is frequently the difference between keeping the home and listing it.

The conditions are specific:

• A signed separation agreement or court order setting out the buyout amount. A draft, or an understanding between the two of you, will not do.
• The amount paid out has to match what the agreement says.
• Both of you on title, and the property has to be owner-occupied.
• The existing mortgage in good standing.
• The remaining spouse qualifying on their own income, with no co-signing from a former spouse.
• A current appraisal.

Qualifying for a mortgage at 60

Age is not a disqualifier and a lender cannot decline you for it. What they are assessing is income, and near retirement that assessment gets harder for reasons that have nothing to do with how old you are.

Three things work against an applicant in their late fifties or sixties:

• Insured buyout mortgages are generally qualified on a 25-year amortization. A shorter amortization means a higher monthly payment, which means you need more income to qualify for the same loan.
• You have to pass the stress test on your own, qualifying at the greater of your contract rate plus two percent or the benchmark rate. A couple who comfortably carried this mortgage together does not mean one of you can.
• The income you are counting on may be about to shrink. A pension being divided, CPP credits being split, and spousal support with a review date attached all reduce what a lender will rely on.

Retirement income does count. Pension payments, CPP, Old Age Security once you are receiving it, and regular registered withdrawals are all income. Lenders look at whether it is documented and durable, and support with an end date or a review clause is treated more cautiously than a pension that pays for life.

What keeping the house really costs

A mortgage approval tells you what you can borrow. It does not tell you whether you should.

Property taxes, insurance, utilities, and maintenance carry on regardless of how many people live there, and past 50 the maintenance line stops being theoretical. A roof, a furnace, or a foundation repair on a single retirement income lands very differently than it did on two salaries.

There is one BC program worth knowing about. The Property Tax Deferment Program lets homeowners 55 or older, surviving spouses of any age, and people with disabilities postpone their property taxes on a principal residence, with the balance registered against the property and repaid on sale or from the estate. The regular program requires at least 25 percent equity. 

The comparison that matters is between an asset that pays you and an asset you pay for. A divided pension pays monthly for life and often carries inflation protection. A house pays nothing, costs money every month, and cannot be spent in pieces.

The downsizing math

Selling and buying something smaller is often the right answer. It is rarely as clean an exchange as people expect, and one BC tax point drives most of the surprise.

A transfer of the family home between spouses or former spouses, made under a written separation agreement or a court order under the Family Law Act, is exempt from Property Transfer Tax. Putting the house in one person's name as part of your settlement is not a taxable transaction.

The rest of the costs are ordinary and they add up quickly: real estate commission, legal fees on both the sale and the purchase, moving, and the repairs a sale usually prompts. Against that, the sale of a principal residence generally does not attract capital gains tax, so the proceeds are not reduced by income tax the way a pension withdrawal would be.

The number that matters is what lands in your account after all of it, and whether that amount, invested or spent down, closes the gap between your income and what you need.

The order to do this in

Past 50, the sequence saves more money than the negotiation does.

• Get a current appraisal before anyone names a buyout figure.
• Talk to a mortgage broker about what you could qualify for, before the agreement fixes the number.
• Work out where the pension, CPP credits, and support will land, because all three feed the mortgage assessment.
• Write down the full annual cost of carrying the home, including maintenance and property taxes, and set it against your expected retirement income.
• Price the downsize properly, including Property Transfer Tax on the new purchase and the full cost of selling.
• Compare the options after tax rather than on face value, because a dollar of home equity and a dollar of pension income are not the same dollar.

Most people who go through that sequence reach a decision they are comfortable with, and a meaningful number of them change their minds partway through. Both outcomes beat finding out at 70.