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  • Borrow money to buy matrimonial home

    I am trying to understand how does net family property being calculated if part of money used toward purchasing a matrimonial home is debt.

    Say today I bought a home valued at 320k. I only have 300k so I used home buyer program to withdraw 20k RRSP from CRA. Now I am in debt to CRA with amount of 20k.

    Assume the next day I got married then divorced a day after. Theoretically, I should split the matrimonial home I just bought with my spouse. My question is whether it is 320k or 300k that will get split between us.

  • #2
    If you took money out of your RRSP to buy your home, you're not in debt to CRA. It's your own money. The asset is now stored in your home instead of in your RRSP, but it's still being divided for equalization. If you don't pay it back to yourself on their schedule, it just gets recorded on your taxes as income, same as if you withdrew from your RRSP for any other purpose.

    If you borrowed from a relative, that would be different.

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    • #3
      Thanks Rioe

      Can you please explain what happen to the equalization if that 20k is borrowed from a friend?

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      • #4
        I may be wrong, but my understanding is that if you incurred a debt in your name alone (borrowed money from your friend) and the money you borrowed went DIRECTLY into an asset which is shared matrimonial property, then you share the debt as well as the asset. In other words, when the $320K home's value is divided, you get $160K and $10K of the debt to your friend and your ex gets the same (or perhaps you get $180K of the value and $20K of the debt, and she gets $140K of the value). However, this would depend on your being able to prove that you put all the money you borrowed from your friend straight into buying the home. I hope you have a good written agreement with the friend who lent you the money as well as bank records showing where it went.

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        • #5
          Then it's just a debt that is shared in addition to the asset, as the money came from outside.

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          • #6
            If you used your own money prior to being married to purchase a home which then became the matrimonial home then you would be looking at an unequal division of assets. The courts take into consideration the length of marriage.

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